TEMA FOOD COMPLEX CORPORATION AND ANOTHER vs. DEKU AND OTHERS [1997-1998] 2 GLR 934

CASE REFERRED TO

(1) Nartey-Tokoli v Volta Aluminium Co Ltd (No 2) [1989-90] GLR 341, SC.

[p.937] of [1997-1998] 2 GLR 934

Afrifa Gyasi for the appellant.

Jones Mensah for the respondents.

Wood JA. The plaintiff-respondents (hereinafter referred to as the plaintiffs) describe themselves and the one hundred and ninety- nine others on whose behalf also they have sued, as loyal and dedicated former employees of the Tema Food Complex Corporation. In February 1995, they were declared redundant afteir having worked for periods ranging between five to thirty years. This was in order, as they put it, to clear the way for the defendant-corporation (hereinafter referred to as the first defendant) to be sold to a German company. What led them tco institute legal proceedings against the first defendant was not soc much the termination of their appointments, as the first defendant’s refusal to pay them severance awards in accordance with a contract entered into betwçeen themselves, represented by the senior staff association on the one hand, and the first defendant on the other, in December 1988.

In the court below, the Attorney-General, the second defendant appellant in these proceedings, had stoutly resisted the claim that what should govern the quantum of severance award they were entitled to is the said contract which was tendered as exhibit B. They had taken the position that the quantum ought, in accordance with the Labour (Amendment) Decree, 1969 (NLCD 157), to be the subject matter of fresh negotiations. In short, they maintained that they were not bound by exhibit B. The court however found for the plaintiffs and ordered that the amount of severance pay be calculated on the basis of the terms embodied in exhibit B.

Dissatisfied with this decision, the second defendant appealed to this court on four grounds. At the hearing, however, the twco original grounds of appeal were abandoned. This appeal therefore turns on only the two grounds contained in the additional grounds. They are:

“(a) That the circuit judge’s interpretation of the law was wrong, especially his interpretation of the effect of the Labour Amendment Decree, 1969, (NLCD 324).

(b) That the learned circuit judge erred in holding that the Supreme Court Case of Nartey-Tokoli v Voltca

Aluminium Co Ltd (No 2) [1989-90] 2 GLR 341, SC was inapplicable to the present case.”

[p.938] of [1997-1998] 2 GLR 934

The central question raised by this appeal is therefore very narrow. Indeed, there is so much common ground between the parties that the area of controversy is greatly narrowed. Both sides are agreed that well before the change in the organisation, as far back as on 20 December 1988, the plaintiffs represented by the senior staff association, had negotiated the amount of severance pay each of the plaintiffs shall be entitled to in the event of redundancy or severance. Again they are agreed that by the clear provisions of paragraph 34 (1) and (2) and paragraph 35 of the NLCD 342, the quantum of severance pay and indeed the modalities for payment is not for example covered by legislation, but shall be matters for negotiations. What they are not agreed on is at what point in time, by law, these negotiations may validly take place.

It was argued on the behalf of the defendants that in law, a valid negotiation such as is envisaged under paragraph 35 (1) of the NLCD 342 may take place only after the break in the employment relationship. It was urged upon us that, having regard to the factors which the law has clearly, under these provisions, stipu lated must be taken into account in determining (1) the amount of severance award, (2) the terms under which payment was to be effected, the necessary implication to be drawn from these statutory provisions is that the negotiation may take place only after the severance and not before. It was therefore submitted on behalf of the defendants that the trial judge was bound to give effect to the provisions of NLCD 342 and he therefore erred when he held the parties were bound by the contract exhibit B. My understanding of counsel’s argument therefore is that exhibit B is void in so far as it sinned against the implied provisions of a paragraph 35 of the NLCD 342.

The response of counsel on the other side is equally straight- forward. First, he contended that nothing in NLCD 342 expressly provides that such negotiations cannot be concluded well before severance occurs. Put in another way, the argument is that the law does not stipulate that negotiations for severance pay may take place only after the relationship has been severed. Second, it was contended that in any event, the factors referred to by the defendants’ counsel do become relevant only where we are dealing with an employee who had suffered a diminution in terms and conditions of service only, not those who have become altogether unemployed, as is the case of these plaintiffs. It was therefoicre urged that the construction advocated by the counsel for

[p.939] of [1997-1998] 2 GLR 934 the second defendant totally flies in the face of all known canons of construction of statutes.

I think it is important to reproduce the paragraphs 34 and 35 of the NLCD 342 in full. They read:

“34 (1) Where an organisation is closed down or where an organi sation undergoes an arrangement or amalgamation, and the close down, arrangement or amalgamation causes a severance of the legal relationship of employee and employer between any person and the organisation as it existed immediately before the close down, arrangement or amalgamation, then, if as a result of and in addition to such severance that person becomes unemployed or suffers any diminution in his terms and conditions of employment, he shall be entitled to be paid by the organisation in whose employment he was immediately prior to the close down, arrangement or amalgamation, compensation, in this Decree referred to as “severance pay.”

(2) In determining whether a person has suffered any diminution in his terms and conditions of employment under sub-paragraph (1) of this paragraph account shall be taken of the past services and accumulated benefits (if any) of such person in or in respect of his employment with the organisation before it was closed down or before the occurrence of the arrangemoent or amalgamation.

35. The amount of any severance pay to be paid under paragraph 34 of this Decree as well as the terms under which payment is to be made shall be matters for negotiation between the employer or his representative and the employee or his representative.”

Employees in any organisation which is closed down or which undergoes any arrangement or amalgamation may be affected by the exercise in three main different ways. There may be those whose employment and terms of conditions remain unaffected by the exercise. Indeed, it may well to that some may profit by the new arrangement, as for example when the employee begins tco enjoy an increase in salary and better conditions of service. We are not in this appeal concerned with such group of employees. Whalt w’e are concerned with, and indeed those employees NLCD 342 seeks to protect, are those who as a result of the severance of the employment relationship: (1) become altogether unemployed; or

[p.940] of [1997-1998] 2 GLR 934

(2) those who escape this misfortune and remains employed, but yet suffer a diminution in terms and conditions of employment.

Upon a plain reading of paragraph 34 (1) of the NLCD 342, such persons shall be entitled to severance pay. However, as rightly argued by both counsel, paragraph 35 of the NLCD 342 stipulates that for both groups of persons quantum as well as the terms undetr which such payment shall be made, shall be matters for negotia tion between the employer and employee or their representatives.

Again, as rightly stated by both counsel, we are confronted with a situation where the law does not expressly stipulate when those negotiations shall or must take place. Therefore, when one applies the first basic rule of construction of statutes, upon a plain reading of the statute, we will find that nothing expressly prohibits an employer and employee from negotiating these matters, namely the quantum of severance pay as well as the modalities foir payment, well before the break in relationship.

But, as counsel of the appellants have urged, the question is: having regard to the clear provision of the paragraph 34 (2), are we not permitted to make this necessary inference that the negotiation envisaged under the law shall take place only after the severance of the legal relationship? I think that by this argument we are being invited to read or import such words into the statute as would give effect to the proposition that negotiations shall take place only after the event.

Bimpong-Buta, the learned author of the Law of Interpretatioin in Ghana (Exposition and Critique), this country’s only store- house on interpretation of statutes, has identified the circumstan ces under which courts may be permitted to read words into an existing statute. Writing under the sub-heading “The Necessarily Implied Construction,” he notes at p 57:

“At common law, the courts are entitled to alter or effect an emendation of the words in a statute by adding to those express words, other words which they consider as neces sarily implied or even to ignore the express words altogether with a view to avoiding unintelligibility, unreasonableness or absurdity.”

(The emphasis is mine.) It is therefore clear that this approach is adopted where without the necessary alteration or correction the statute does not make sense, or leads to unreasonableness or absurdity. Speaking for myself, I do not find any drafting error, let [p.941] of [1997-1998] 2 GLR 934 alone a graling one such as should entitle me to add words that would yield the result advocated by counsel for the second defendant. Also, I do not find that without these additions, the statute as it stands, leads to any unreasonableness, or absurdity or ambiguity.

But there is yet another reason why I find myself unable to infer from paragraph 35 (1) of NLCD 342 that negotiations shall take place only after the relationship ceases. The uncontroverted evidence in this case shows that the respondents became unemployed as a result of the exercise. They did’ not fall into the second group of persons envisaged under NLCD 342, namely those who are employed but have only suffered a reduction or diminution in terms and conditions of employment. Paragraph 34 (2) is therefore wholly inapplicable to them. It follows that none of the factors outlined in paragraph 34 (2), i.e. past services and accumulated benefits, need be taken into account. They are wholly irrelevant to their cause when it comes to determining their position or status following this exercise.

The arguments of counsel for the second defendant had been that it is these very factors outlined in paragraph 34 (2) of NLCD 342, and which properly speaking are matters which can be identified only after the break in relationship, that should impel us to adopt the implied constructionist approach. I have sought to demonstrate that even so, such arguments would be valid only in respect of persons who have suffered a diminution in terms and conditions of employment, not those who like the present respondents have become totally unemployed. In my view then, since paragraph 34 (2) of NLCD 342 is wholly inapplicable to the respondents case, the argument is fallacious. It does follow that employees, who following a shut down, amalgamation or other arrangement of their organisation fall into redundancy or who in the language of the Decree become unemployed, are not bound in law to enter into fresh negotiation with their employers on: (1) the quantum of severance award; (2) terms of payment of these awards, where they can prove the existence of a valid contract covering these matters. They should be held to have complied paragraph 35 of the NLCD 342, where they can prove that prior to the actual break in relationship, they had concluded a valid contract on these matters with their employer. Both sides would be held as having complied with paragraph 35 of NLCD 342, and the parties would be held to the agreement.

[p.942] of [1997-1998] 2 GLR 934

In my view then, under paragraphs 34 (1) and (2) as well as 35 of the NLCD 342, the amount of severance pay as well as the modalities for payment are all matters which may be agreed upon by employer and employee well before the actual event of severance in the employment relationship occurs.

Even so, assuming I am in error and the correct statement of the law is that, generally speaking, these negotiations shall take place only after redundancy has been declared, there is one other compelling reason why in this particular case the decision of the court below, namely that the parties are bound to by the exhibit B ought not to be disturbed.

At law, it is only contracts that are expressly or implicitly prohibited by statute that are illegal. Express statutory prohibitions of contracts are by no means uncommon. Those that may be said to be impliedly prohibited however raises some difficult questions of construction. But whenever these difficulties have arisen, the courts have applied certain important basic questions and reached a just conclusion. First, NLCD 342 does not either expressly or by necessary implication prohibit or forbid an employee and employer concluding negotiations for the quantum of severance pay or the mode of payment well before actual severance occur. The parties are free to contract out of the provision of any statute provided they can show that the contract is not expressly or implicitly prohibited by statute. Thus, I can very well imagine an employee and employer agreeing on the very first day of employment how much severance pay shall be given in this event of a break in employment. The evidence in this case shows the parties, in spite of the provisions of paragraph 35 of the NLCD 342, chose to contracts out of the statute. I do not think they can be permitted to argue that they have contravened the provision of the Decree and are therefore not bound by this contract.

The statute aside, exhibit B is not one of those contract which are illegal at common, law or offends public policy.

Looked at from every angle, then, the defendants are bound by the terms of exhibit B as far as the quantum of severance pay is concerned. The decision of the court was right in law and I will therefore dismiss the appeal.

Essilfie-Bondzie JA. I regret to say that I do not agree with the majority decision. I therefore deem it necessary to give my own opinion.

[p.943] of [1997-1998] 2 GLR 934

The appellant (who will hereinafter be referred to as the second defendant) has appealed against the judgement of the circuit court delivered on 16 January in favour of the respondents (who will hereinafter be called the plaintiffs). The plaintiffs instituted an action at the Circuit Court, Tema claiming on an amended writ of summons the following reliefs:

“(1) An order of declaration that the defendant-corporation cannot be sold to new owners unless and until the plaintiffs have been paid their severance pay.

(2) An order directed against the defendant-corporation to pay up all severance pay due the plaintiffs before pro ceeding to hand over the corporation to new owners.

(3) An order for perpetual injunction.

(4) An order restraining the defendants from being handed over to any third party until all plaintiffs’ severance pay has been paid.

(5) An order for the immediate payment of plaintiffs’ end- of-service benefits.

(6) Damages for breach of contract.”

The plaintiffs’ case as disclosed in the pleadings and in the evidence of Gabriel Kwashie Deku, the first plaintiff who gave evidence for himself and on behalf of the other plaintiffs, was that they were all senior members of the first defendant corporation. They had a senior staff conditions of service which was embodied in exhibit A as amended by exhibit B, dated 20 December 1988. His evidence was that it was agreed that severance should be paid to the senior staff in accordance with the provisions of exhibit B. In February 1995, however the plaintiffs were declared redundant by the first defendant in order to clear the way for the corporation to be sold to a German company under the Government Divestiture Programme. The plaintiffs claimed that a condition of their service contract provides that in the event of a redundancy of the first defendant’s employees, which the plaintiffs were, they were to be paid severance pay. The plaintiffs’ complaint was that the first defendant had refused to pay them their entitled severance pay before the hand over to the German company.

The first defendant did not deny that the plaintiffs were entitled to a severance pay. The issue which they joined with the plaintiffs was in regard to the amount of severance to be paid. The contention of the defendants was that the amount of severance pay

[p.944] of [1997-1998] 2 GLR 934 was subject to negotiation between the employer and the staff in accordance with the Labour (Amendment) Decree, 1969 (NLCD 342). They averred that when management of the first defendant were informed of the government’s intention to divest its interest in the corporation, management invited the plaintiffs, the senior staff, for negotiations. This was initially rejected by the plaintiffs. Later when the second defendant, the Attorney-General, was joined to the suit following an adjournment granted by the court, the defendants met with the plaintiffs and a mutually acceptable agreement was reached with the plaintiffs followed by payment of severance pay and all benefits to the plaintiffs. It was the contention of the defendants that after a final agreement had been arrived at with the plaintiffs, they later agreed to sign the resulting agreement only after they had informed their members. Subsequently, the plaintiffs refused to sign the memorandum of agreement. This occurred, according to the defendants, after the Divestiture Implementation Committee had released funds with which all the plaintiffs were paid. The defendants therefore contended that the plaintiffs were approbating and reprobating the terms of settlement under which they have already taken benefits.

After hearing evidence and arguments by counsel for the parties, the learned judge of the court below made the following conclusions in his judgement:

“The plaintiffs have already negotiated with their employees (the first defendant herein) as to how much to pay them as severance pay. And that could be found at page 10 of their conditions of service – —exhibit B. The negotiation that they had with the senior staff was unlawful. The defendants compelled the plaintiffs to do what they were unwilling to do. Judgement is hereby entered for the plaintiffs.”

(The emphasis is mine.) After his judgment, the second defendant has appealed to this court on a number of grounds. In arguing the appeal, however, learned counsel relied solely on the two additional grounds of appeal filed on the 11 June 1996, namely:

“(a) The circuit court judge’s interpretation of the law was wrong especially his interpretation of the effect of Labour (Amendment) Decree, 1969 (NLCD 342.

(b) That the learned circuit court judge erred in holding that the Supreme Court case of Nartey- Tokoli v Volta

[p.945] of [1997-1998] 2 GLR 934

Aluminium Co Ltd [1989-90] 2 GLR 341, SC was applicable to the present case.”

Learned counsel argued the two grounds together. Mr Afrifa- Gyasi referred to paragraphs 34 (1) and (2) and 35 of NLCD 342 and submitted that the purpose of the law is that payment of severance must be negotiated by the employer and the employee at the time of severance or redundancy. He said that looking at the provisions of NLCD 342 there is no way one can determine severance pay ahead of the event. That the event occurs before the negotiation starts. Learned counsel argued that the terms contained in the condition of service— – exhibit B contravenes the provisions of the statute. He maintained that the plaintiffs were not entitled to their claim and that the appeal should be allowed.

The affect of the argument of Mr Jones-Mensah, learned counsel for the plaintiffs, was that the severance pay was negotia- ted long before the redundancy complained of occurred. And that NLCD 342 does not prohibit negotiation in advance. He referred to page 10 of the senior staff conditions of service, exhibit B, and argued that parties agreed long before the event as to what should happen in case of change of ownership. He contended that exhibit B are the terms agreed on in respect of severance and the defendants are bound by it.

NLCD 342, paras 34 (1) and (2) and 35 state:

“34. (1) Where an organisation is closed down or where an organisation undergoes an arrangement or amalgamation and the close down, arrangement or amalgamation causes a severance of the legal relationship of employee and employer between any person and the organisation as it existed imme- diately before the close down, arrangement or amalgamation, then, if as a result of and in addition to such severance that person becomes unemployed or suffers any diminution in his teirms and conditions of employment, he shall be entitled to be paid by the organisation in whose employment he was immediately prior to the close down, arrangement or amalgamation, compensation in this Decree referred to as ‘severance pay’.

(2) In determining whether a person has suffered any diminution in his terms and conditions of employment under sub-paragraph (1) of this paragraph account shall be taken of the past services and accumulated benefits (if any) of such

[p.946] of [1997-1998] 2 GLR 934 person in or in respect of his employment with the organisation before it was closed down or before the occurrence of the arrangement or amalgamation.

35. The amount of any severance pay to be paid under paragraph 34 of this Decree as well as the terms under which payment is to be made shall be matters for negotiation between the employer or his representative and the employee or his representative.”

It is plain from paragraphs 34 (1) and (2) and 35 of NLCD 342 that payment of severance pay should be a matter of negotiation bEetween the employees and the employers when an event like redundancy, amalgamation or change of ownership occurs. And that the first defendant was bound to pay all severance pay due to the plaintiffs. Paragraphs 34 (1) and (2) and 35 of NLCD 342 also explain the circumstances under which severance pay arises.

As already indicated, the learned trial judge decided that the plaintiffs have already negotiated with their employers as to how much to pay them as severance pay. The negotiations he referred to, according to him, is embodied in exhibit B which is the senior staff conditions of service, dated 20 December 1988. He was of the view that the parties having already agreed at page 10 of exhibit B and spelt out before hand what should be paid to them in case of change of ownership, severance pay should be paid to the plaintiffs as contained in exhibit B.

It is evident from the reading of paragraph 34 (1) and (2) and 35 of NLCD 342 that the law was promulgated to determine the rights of employees when an event like divestiture, redundancy or change of ownership occurs. The combined effect of the para graphs quoted above postulates that payment of severance pay should be a matter of negotiation between the employees and the employers at the time of the event or change of ownership. The law is binding on both parties. And the first defendant was bound to pay all severance pay due to the plaintiffs in accordance with the Decree. It is my view that it is not open to the parties to enter into an agreement or contract outside the Decree to pay severance pay without negotiation and also far ahead of the event. I am strengthened in this view by the fact that paragraph 34 (2) of NLCD 342 and the nature of the events that should determine the severance of the employee, there is no way of determining severance pay ahead of the event.

[p.947] of [1997-1998] 2 GLR 934 It is not disputed that the divestiture or redundancy exercise complained of occurred in 1995. The conditions of service of the senior staff relied upon by the plaintiffs was made in December 1988. So that at the time the said agreement was made, the operative law governing the rights of employees in the event of change of ownership was NLCD 342 passed in 1969. It is noticeable that in the writ of summons and their evidence the plaintiffs could not tell the court how much they were entitled to receive as severance pay. The implication is that even if the court says that a severance pay should be made to the plaintiffs, this cannot be effected unless the plaintiffs sit down with the first defendant to negotiate. Significantly on 21 January 1995, the trial court recognised the need for the employers and the employees to negotiate and to enable them to do so he adjourned the case.

The recorded evidence demonstrates that the parties subsequently sat down and negotiated. They came to a settlement. Since that time they have gone to collect their severance pay and other entitlements. In this connection, I consider the unchallenged evidence of Mrs Esther Gladys Wellington, the district labour officer (third defence witness) very crucial. I will write it down verbatim and in extenso. She said “I am aware of the redundancy exercise at the Tema Food Complex Corporation. I was present at the three meetings held with the senior staff on 2, 7 and 8 February 1995. I am aware also that there was dispute in respect of the amount to be paid.” Mrs Wellington continued thus:

“Q On 8 February 1995 what happened at the point the meeting broke out?

A The senior staff informed the meeting that since they have not been mandated to agree on whatever had been proposed by management, they would want to go back to inform the others and then come back with a reply.

Q Are you aware that they came back?

A No. I am not aware.

Q Are you aware that the senior staff have their severance pay?

A Yes.

Q How do you assess the severance pay?

A Severance pay is always negotiated because it should always be negotiated upon when the exercise is going on.

Q What exercise9?

[p.948] of [1997-1998] 2 GLR 934

A Redundancy, lay off, etc.

Q You are aware of the divestiture of Fishing Corporation?

A Yes.

Q Would you say that the amount was negotiated at the time of the divestiture?

A Yes.”

(The emphasis is mine.) The above evidence of the third defence witness which, as indicated, was not challenged under cross-examination prove that the plaintiffs and the defendants sat down and negotiated for the severance pay when the trial court gave an adjournment in February 1995.

She also established that negotiation for severance pay occurs at the time of the divestiture, redundancy or lay-off exercise and not before. It is therefore my judgement that exhibit B never took away the right of negotiation which has been provided in NLCD 342. This is so because at the time exhibit B was made in 1988, the divestiture exercise complained of had not taken place. More over, it is trite law that a statute takes precedence over agreement or contracts so that to the extent that exhibit B contravenes the provisions of NLCD 342, it is ineffective.

I hold from the evidence on the record that at the time the plaintiffs took the action indorsed on the writ of summons, they had not negotiated for any payment of severance pay within the clear meaning of NLCD 342. They had therefore no cause of action. The action initiated by them was premature. That was why the plaintiffs could not endorse on the writ of summons the sum that they were claiming. Until the parties sat down to negotiate they cannot tell court how much should be paid.

I have read the case of Nartey-Tokoli v Volta Aluminium Co Ltd [1989-90] 2 GLR 341, SC which was relied upon by the trial judge to give judgmnlent for the plaintiffs. It is my humble opinion that that case has no relevance to the case that was before him, and he therefore erred in basing his judgement on it.

It is my view that the plaintiffs should have gone to court to seek an order that the first defendant should be made to negotiate with them. This is so because having regard to the plaintiffs’ claim as indorsed on the writ of summons, the court cannot make any meaningful order that is enforceable.

In the light of the foregoing, it is my judgment that the judgment of the trial court be set aside and the appeal be allowed.

[p.949] of [1997-1998] 2 GLR 934

Gbadegbe JA. The question which arises in this appeal is whether the view of the law as expounded by the trial court, on the determination of the severance pay to which the plaintiff-respondents (hereinafter referred to as the plaintiffs) were entitled to is correct. In the trial court, the plaintiffs contended that having regard to the collective agreement between them (the senior staff association) and the first defendant-appellant (hereinafter referred to as the first defendant) in which provision was made for payment of severance pay upon the occurrence of specified events, the first defendant was bound by the same and as such cannot be enabled to pay to the plaintiffs any amount other than that pro iviided in the said contract: see in particular page 10 of exhibit B which provided for this. On the other side of the fence, the defendants contended that the determination of what the plaintiffs are entitled to can only occur after severance, as the negotiations between the employee and the employer and the employee cannot be reached before severance. In taking this view of the matter, the appellants, relied on ;paragraph 34 (1) and (2) of the Labour (Amendment) Decree, 1969 (NLCD 342). It was thus their case that the provisions on this contained in the collective agreement admitted at the trial as exhibit B is of no effect.

In my opinion the parties through their counsel repeated in this court essentially the positions which they took at the trial and as such I do not desire in this delivery to repeat what was contended on their behalf. Instead, I shall proceed straightaway to consider which of the two opinions is a correct exposition of the law. I shall however pause and say generally that in contracts of employment, the employer does not enter into a separate agreement with each of its employees such as is contained in exhibit B; but having had the said collective agreement entered into by the lawful represent- atives of the employees, incorporates the terms of such agreement between it and the employees who belong to the category covered by the collective agreement. So stated, the agreement becomes the document which spells out the relationship between the employer and the employee. This being so, upon the occurrence of any of the situations catered for by the agreement, in my opinion, either party is bound to observe and or honour the contractual provision which it had entered into, except in cases where such a provision may be said to be affected by any of the known vitiating circumstances, none of which has been urged in this case.

[p.950] of [1997-1998] 2 GLR 934

This being the position, I will next pass to consider the provisions of paragraphs 34 (1) and (2) of NLCD 342 on which the first defendants rely to argue that it was not bound to comply with the provisions contained in exhibit B on the determination of severance pay. Before then, however, in my opinion, it is important to say that at the trial and before us in this forum, the action was contested on the common ground that the plaintiffs were permanently out of job following its divestiture to new owners.

Paragraphs 34 (1) and (2) of NLCD 342 provide as follows:

“34. (1) Where an organisation is closed down or where an organisation undergoes an arrangement or amalgamation and the close down, arrangement or amalgamation causes a severance of the legal relationship of employee and employer between any person and the organisation as it existed immediately before the close down, arrangement or amalgamation, then, if as a result of and in addition to such severance that person becomes unemployed or suffers any diminution in his terms and conditions of employment, he shall be entitled to be paid by the organization in whose employment he was immediately prior to the close down, arrangement or amalgamation, compensation, in this Decree referred to as “severance pay.’

(2) In determining whether a person has suffered any diminution in his terms and conditions of employment under sub-paragraph (1) of this paragraph account shall be taken of the past services and accumulated benefits (if any) of such person in or in respect of his employment with the organisation before it was closed down or before the occurrence of the arrangement or amalgamation.”

Further to this, paragraph 35 of NLCD 342 also provides as follows:

“35 The amount of any severance pay to be paid under paragraph 34 of this Decree as well as the terms under which payment is to be made shall be matters for negotiation between the employer or his representative and the employee or his representative.”

In my thinking, a clear reading of the above statutory provisions reveal that there are two consequences likely to occur from the

[p.951] of [1997-1998] 2 GLR 934 close down arrangement or amalgamation of an organisation; the said consequences being unemployment of a permanent nature and employment but with a reduction in one’s entitlement when the new employment is viewed against the background of that person’s entitlements “immediately before the close down, arrangement or amalgamation.” I also think that having regard to paragraphs 34 (1) and (2) of NLCD 342, the determination of severance pay in either of the two situations envisaged upon the occurrence of any of the events which would entitle an employee to “severance pay” varies. This being so, it is important that the consequence which the said events occasioned to the plaintiff be first identified before one considers their entitlement. As said earlier on, this action was fought on the common ground that the plaintiffs became unemployed and not that they continued in employment but on conditions which were less favourable than what they enjoyed immediately before the event which preceded the issue of the writ of summons.

This being the position, I am of the view that the provision of exhibit B on the payment of severance pay is in keeping with the law in that exhibit B was a document agreed upon following negotiations between the parties herein. In my opinion, having regard to the provisions of NLCD 342, any employer must, if reasonable, envisage the occurrence of any of the situations pro vided in section 34 (1) and (2) and consequently make provisions for what an employee should receive when the contract is severed,; and having done so, the employer cannot seek to resile from its solemn contractual undertaking on the ground that it is only when the event occurs that this can be determined. I do not think so. I think that the essence of statute law is to enable all who are likely to be affected thereby to make arrangements by way of guiding their future conduct. I have no doubt that an employer such as the first defendant who in his contract of employment with its employees, envisaged any of the events provided for in paragraph 34 (1) and (2) NLCD 342 and made provision therefor acted reasonably. Having so done, I do not think that when the event for which the said provision was made occurs, the employer should resile there from, for it was the basis of the employee’s faithful discharge of his duties.

Indeed, there can be no doubt that the employee derives the source of his employment in terms of his responsibilities to his employer and his entitlements from exhibit B, i.e. the collective

[p.952] of [1997-1998] 2 GLR 934 agreement. In such a situation, I think it is right and in keeping with good sense and justice to hold the employer to his obligations, else he would have been enabled to take the benefits of the contract but resile from his obligations thereunder. I am of the opinion that what NLCD 342 sought to avoid is the arbitrary and or unilateral determination of the employee’s entitlement in the event of the severance of the contract of employment.

Accordingly, what is important is that the amount payable should have been arrived a.t as a result of negotiations between the employer and the employee, as indeed exhibit B resulted from. I do not think it matters whether the negotiation resulting in the agreement was prior in point of time to the occurrence of any otf the envisaged events or after the passage of the event. What is relevant is that the amount to be paid must have been the product of negotiations between the parties to the contract of employment, i.e. the parties to this appeal. I1 think if the legislature had intended that the negotiation should bhe effective only after the occurrence of the envisaged situation, it would clearly have said so; and not having so said, the effect is that it reserves to the employer and employee when to negotiate on this. This being so, since there is no dispute that exhibit B was entered into following negotiations between the employer and the employee, effect must be given to the same.

In the result, I see no merit in the onslaught of the de1fendants on the judgement of the trial court. The appeal is dismissed and the judgement of the trial court affirmed.

Appeal dismissed.

SA