JIM NGANWA & OTHERS

THE REPUBLIC OF UGANDA

IN THE INDUSTRIAL COURT OF UGANDA AT KAMPALA

LABOUR DISPUTE REFERENCE NO. 152OF 2017

ARISING FROM KCCA/GEN/LC/133/2017

JIM NGANWA & OTHERS ………………….. CLAIMANT

VERSUS

GEMTEL LIMITED ………………… RESPONDENT

BEFORE

1. THE HON. CHIEF JUDGE, ASAPH RUHINDA NTENGYE

2. THE HON. JUDGE, LINDA LILLIAN TUMUSIIME MUGISHA

PANELISTS

1. MR. JACK RWOMUSHANA

2. MS. ROSE GIDONGO

3. MS. ANTHONY WANYAMA

AWARD

BREIF FACTS:

According to the claimants’ they were employed by the Respondent Gemtel Limited, trading as Lap Green Network, carrying on Telecommunications Services among other services. According to the Claimants they worked for its affiliate under the Libiyan Consortium in Southern Sudan. They were collectively terminated on the 22/02/2016 by letter dated 29/02/2016 on the grounds that, the Company could no longer pay their monthly salaries because its financial assets had been ceased by their Sudanese counter parts. They also allege that the Respondent in its letter of termination undertook to compute the claimants’ terminal benefits after successful handover. They contend however, that at the time of their termination, they were not paid their full salary entitlements. According to them, the Respondent is liable to pay their claim because they owned 95% shareholding in Gemtel Limited. The 1st claimant was employed as Manager finance and later chief Finance and Administration Manager, the 2^nd Claimant as Financial system and process Accountant, the 3^rd Complainant as designer Trade Coordinator, the 4^th Claimant as B.S.S and Optimization Engineer the 5ht as Customer Care Superviser and later promoted to the position of Human Resource and Administration Manager, the 6^th as Treasurer and collection Manager.

When the matter came up on the 4/5/2018, Deus Nsenginyunva appeared for the Claimants and applied to proceed exparte on the grounds that; the Respondents had failed and or refused to file a reply or to attend court despite being served, including substituted service. We are satisfied that the Respondent was served as stated by Counsel, so we granted him leave to proceed exparte.

ISSUES

The issues for resolution as stated by counsel were as follows:

1. Whether the Respondent is liable to pay the Claimants terminal benefits and Salary arrears?

2. Any other remedies?

EVIDENCE

The claimants adduced evidence from themselves and in their written testimonies they stated as follows:

According to his witness statement, the 1st claimant Mr. Jim Nganwa signed his contract of service with the Respondent as Manager Finance and later Chief finance and Administration Officer at the Uganda Telecom Head Office premises in Kampala. He was deployed in Juba South Sudan. By the time of the seizure of the Respondent and his termination on the 29/02/2016, he had worked for 4 years and 3 months at a salary of USD 7500 per month. According to him the Lap Green N the consortium to which the Respondent belonged undertook to pay the Respondent’s workers salary arrears but they did not hence this suit. He claimed that at the time of his termination he was entitled to USD 153,220 which included USD 22,500 as salary arrears, UD 15,000 as payment in lieu of notice USD 31, 875 as terminal benefits and Social security USD 85,975. He also asserted that given his position as Chief Finance and Administration officer he knew for a fact what the other Claimants had stated in their statements was correct.

In his evidence in chief, Claimant witness No. 2 Claimant Steven Wagooli stated that he was employed as financial system and Processes Accountant, he worked for 3 years and 9 months at a salary of USD 3600 per month and his total entitlement was USD 55805 which included; USD 15,000 as payment in lieu of notice, 11,250 as terminal benefits, USD 42,300 as Social Security.

Claimant witness 3 Eyatu Timothy did not make a witness statement but according to his contract of employment he was appointed on the 10/6/2013 as designer and trade coordinator, earning USD 1,660 per month. According to the memorandum of claim his claim is 12,023 which includes USD800 as salary arrears, USD 11, 250 social security.

Claimant witness 4 Donald Wangi was employed as BSS and Optimization Engineer signed his contract of employment on the 15/09/2011. His claim was for USD 55,805 broken down as follows USD 3600 as salary arrears, USD 15,000 as payment in lieu of notice USD 42, 300 as social security and USD 11,250 as terminal benefits.

Claimant witness 5 Doreen Mbabazi was employed as customer Care Superviser but later promoted to Human Resource and Administration Manager for 5 years at a salary of USD 3800per month. She claims USD 72,659 which comprised of USD 3800 salary arrears, USD 3800 in lieu of notice, USD 20,900 terminal benefits, 46,321, as social security.

Claimant 6 Nadia Kuluthum Namubiru was appointed on 1/11/2010 as Treasury and Collection Accountant earning USD 291 per month. Her claim was USD 29,758 broken down as follows; salary arrears USD 291, payment in lieu of notice USD 291, USD 9,302 terminal benefits and USD 19,874 as social security.

SUBMISSIONS

It was submitted for the Claimants that they were all employed by the Respondent each having entered into a contract of service with it, marked “A”, “B”, “C”, “D”, “E” and “F” respectively.

According to Counsel, the Respondent was owned by a Libyan Consortium known as Lap Green N which also owns Uganda Telecom and its head office was at Telecom House Plot 24-4A Speke Road as well as that of Uganda Telecom. It contracted the claimants in Kampala -Uganda and sent them to work for its affiliate in Southern Sudan. According to Counsel their contracts stipulated that they would work for the Respondent and all its affiliates. He submitted that the claimants were collectively terminated following a conflict between the Respondents Libyan and South Sudanese directors. He contended that Lap Green N which owns the Respondent, promised to pay the Claimants outstanding terminal benefits, salary arrears and social security benefits which the Respondent was liable to pay. He computed the claims as follows:

1. 1^st Claimant –US Dollars 153,220

2. 2^nd Claimant –US Dollars 45,627

3. 3^rd claimant – US Dollars 12,023

4. 4^th Claimant- US Dollars 55,805

5. 5^th Claimant –US Dollars 72,659

6. 6^th Claimant-Us Dollars 29,758

Totaling USD 369,093.

He contended that they were all terminated and the reason for their termination was not stated in the termination letter. He cited section 41 of the Employment Act 2006, which provides for the entitlement to wages and GULLABHAI VS KAMPALA PHARMACEUTICALS Ltd SCCA 6 OF 1999 to support his argument that the claimants having been terminated wrongfully they were entitled to be paid damages equivalent to the remaining periods of their contracts. He therefore prayed that they are paid salary arrears and payment in lieu of notice, as was provided for in their contracts of service. He cited Barclays Bank of Uganda vs Godfrey Mubiru SCCA No. 1 OF 1998, whose holding is to the effect that where a contract of employment stipulates that a party may terminate it by giving notice of a specified period such contract may be terminated by giving the stipulated notice or payment in lieu of the notice.

He further argued that the claimants were entitled to gratuity and NSSF although he did not state how they were derived. He cited UGANDA REVENUE AUTHORITY VS WANUME KITAMIRIKE C.A NO. 138

DECISION OF COURT

We have perused the file before us and found as follows:

1. Whether the respondent is liable to pay the claimants salary arrears, terminal benefits, payment in lieu of notice and social security?

Before we resolve this matter, we think it is important to first discuss the ownership of the Respondent, given that Counsel submitted that it was owned by a Libyan Consortium known as Lap Green N, which also owns Uganda Telecom.

The nature and character of a company are determined by its memorandum and Articles of Association. (See Section 21(2) of the Company’s Act 2012. It is common knowledge that the Memorandum of Association sets out the names of promoters, the share capital, and the objects of the company while the Articles of Association set out among others, the relationship between shareholders and directors, and the rights of shareholder holders.

We carefully scrutinizied the photo copies of the Memorandum and Articles of Association on the record and found that the Respondent Gemtel Limited was incorporated in Uganda on the 17/07/2006, with a share capital of ugx. 20,000,000/- divided in 100,000 shares of Ugx.200, by 2 subscribers in the names of Mulenga Augustus Ceasor holding 90% of the shares and Charity Basaza Mulenga holding 10%. We did not rely on the photo copy of an undated and amended Articles of Association because it did not specify the subscribers and order of allotment of shares. We also considered the unclear photo copy of a “Transfer of share stock” form dated 7/4/2010, and found that 80,000 shares had been transferred to LAP GREEN NETWORK LIMITED.

Counsel in his submissions stated that the Respondent is largely owned by the Libyan Consortium known as LAP GREEN N which also owns Uganda Telecom. He also submitted that the Respondents affiliate in South Sudan is also owned by the Respondent and South Sudanese nationals. However he did not provide evidence to show that there was a Principle Agency relationship between the South Sudanese affiliate and the Respondent Company. There was no evidence to indicate that LAP GREEN NETWORK had full control of the internal management of the Respondent even though they it was purported to be a majority shareholder in it. (See Smith & Knight Ltd vs Brimingham Corporation (1939) 4 ALLER.

A close scrutiny of the letter written by the General Manager of Gemtel Limited t/a as Gemtel Green Network, one Adel Abu Fare’s, to the staff indicated that, the Gemtel Limited was incorporated in South Sudan. The letter states as follows:

“Dear Employees of Gemtel Limited (GT) South Sudan)

Unlawful seizure of Gemtel’s operational assets-implications for your employment by Gemtel

We write to you as the majority shareholder of Gemtel limited (Gt) (SouthSudan) (“Gemtel”) a limited liability company incorporated in south sudan and t/a Gemtel Green Network. We understand you are currently employed by Gemtel, but not fully aware of your current personal circumstances.

As you will no doubt be aware Gemtel’s operational business has been subject to unlawful seizure.

More particularly certain South Sudanese personnel, namely Gemtels former external legal advisor, Mr. Kamal John Akol, who says he is the ambassador of South Sudan, Mr. Tong Tong Wiew Dong who says he is a major in the South Sudan defence force have unlawfully seized possession and control of Gemtel’s business premises in Juba. Their conduct is theft and has no legal foundation whatsoever.

LAP GreenN has recently taken steps to secure the physical return of the business however it has been forcefully denied access to Gemtel’s head Office in Juba by the aforementioned individuals. As regards gemtels business, we understand it has no funds to operate. All of its bank accounts have been frozen. The business of Gemtel has for all intents and purposes ceased.

As a result of the unlawful seizure of its assets, Gemtel is at the moment incapable of providing you with any future or historic salary payments /insurance /general employment benefits. LAP Green N is currently taking steps to reclaim its assets. If LAP Green N is successful, LAP GreenN intends to support Gemtel to re-establish the business and to pay its creditors and suppliers including employees.

Given the circumstances any employment duties carried by you for the persons who have unlawfully seized Gemtel shall be at your own risk. You are notified of the illegality of their conduct.

Where Gemtel employees provide assistance to LAP Green N at the time and refrain from facilitating the continued unlawful seizure of Gemtel by the afore mentioned persons., LAP GreenN intends( but without legal obligation to do so) to make ex gratia arrear salary payments to Gemtel employees on a case by case basis, after regaining control of Gemtel, Mr. Adel Abdu Fares,(adel.abdufares@lap-greenn.com) to discuss your personal circumstances with him, as appropriate.

We thank you in anticipation of your understanding and support.

Yours sincerely

____________

Adel Abdu Fares

General Manager –Gemtel

For and on behalf of LAP Green N”

For emphasis the first paragraph of this letter clearly states that the Gemtel limited was incorporated in South Sudan. It states as follows;

“We write to you as the majority shareholder of Gemtel limited (Gt) (SouthSudan) (“Gemtel”) a limited liability company incorporated in south sudan and t/a Gemtel Green Network We understand you are currently employed by Gemtel, but not fully aware of your current personal circumstances…”(our emphasis).

We noted that the contracts of Claimants 1, 4, 5, and 6 were entered in to with Gemtel Green Network and Claimants 1 and 2 with Gemtel Limited. However all the contracts were signed by a one Ghadfi Muhamed as Chief Executive Officer.

The termination letter dated 29/02/2016 and signed by the HR Advisor and it was written on Gemtel Green Network’s headed paper and stamped with Gemtel Green Network’s Human Resource and Administration Stamp.

A close scrutiny of the copies of the Claimants’ contracts on the record showed the following:

The 1^st Claimant Jim Nganwa entered into a 2 year contract of employment as Manager Finance and Accounts with GemTel Green Network on the 1/12/2011.

The 2^nd Claimant Steven Wagooli entered into a 1year contract of employment with Gemtel Ltd. on 15/01/2013.

The 3^rd Claimant, Timothy Eyatu entered into a 1 year contract of employment with Gemtel Limited on the 10/06/2013 as designer and trade coordinator.

The 4^th Claimant, Donald Wangi entered into a 2 year contract of employment with Gemtel Green Network on 15/09/2011 renewable on good performance. The Respondent Gemtel limited is therefore not liable for his claims.

The 5^th Claimant, Doreen Mbabazi was promoted to Human Resources and Administration manager at Gemtel Green Network Limited.

Claimant No. 6, Nadia Kuluthum was employed by Gemtel Green Network as Treasury and Collection Manager on the 1/11/2010 for 2 years.

It is clear that Claimants 1, 4, 5 and 6 entered into employment with Gemtel Green Network, while Claimants 1 and 2 with Gemtel Limited.

However all the contracts including those of Claimants 1 and 2 were signed by a one Ghadfi Muhammed as Chief Executive Officer, and they all bore Gemtel Green Network’s logo at the head. The record further showed that the letter of termination which signed by Gemtel Green Network’s HR adviser also bore Gemtel Green Network’s logo at the head.

Given Abdul Adel Fares letter (supra) which clearly stated that Gemtel Limited (South Sudan) was trading as Gemtel Green Network and all the claimants contracts were signed by its Chief Executive officer, it is clear to us that the Claimants did not have any employee/employer relationship with Gemtel Limited incorporated in Uganda.

It is trite that an Employee/employer relationship is created by a contract of Employment and in the instant case the Claimants entered into employment contracts with Gemtel Limited (South Sudan) t/a Gemtel Green Network and not Gemtel Limited incorporated in Uganda. We have no doubt in our minds that all the 6 claimants were employed by Gemtel Limited (South Sudan) t/a Gemtel Green Network and not Gemtel Limited incorporated in Uganda, notwithstanding that Gemtel Limited incorporated in Uganda also transferred its majority shareholding to LAP GREEN NETWORK as seen from the “Transfer of stocks” form already mentioned above. We did not find any evidence of any principal agency relationship or any other thing to link Gemtel Limited (south Sudan) t/a as Gemtel Green Network with Gemtel Limited incorporated in Uganda.

We were constrained to peruse the photo copies of Accounts filed on the record given that they were another means through which we could establish whether the Respondents had any link with the Claimants through payment of salaries to them. Counsel however did not make any submissions regarding these accounts. It seems that the Accounts were intended to show that the Claimants received salary from Gemtel Limited incorporated in Uganda, given that the accounts are titled Gemtel Limited and were held in KCB Bank Uganda Ltd, KCB Oasis – Uganda.

After carefully analyzing the Accounts however we were not able to ascertain which company held this account given that we had already established that there were 2 Companies registered under the name of Gemtel Ltd, one incorporated in South Sudan and another in Uganda. Having also established that the Claimants were actually employed by Gemtel Limited (south Sudan) t/a Gemtel Green Network, in the absence of evidence to show that there was any connection between the 2 companies, it was not possible for us to determine which of the Company’s was the Account holder or which of the 2 was actually deposited the monies purported to be paid out as salaries to the claimants. The accounts were therefore not sufficient evidence to establish an employment relationship between the claimants and Gemtel Limited incorporated in Uganda.

In the circumstances this claim fails. It is dismissed with no orders as to costs.

Signed and delivered by:

1.THE HON. CHIEF JUDGE, ASAPH RUHINDA NTENGYE ………………

2.THE HON. JUDGE, LINDA LILLIAN TUMUSIIME MUGISHA ………………

PANELISTS

1. MR. JACK RWOMUSHANA ………………..

2. MS. ROSE GIDONGO …………………

3. MS. ANTHONY WANYAMA …………………

DATE …………………………