Zambia National Building Society v Alfresd Swesha Musonda (Appeal No.231/2016) (9 December 2019) – ZambiaLII

,_ IN THE SUPREME COURT OF Appeal No.231/2016 HOLDEN AT NDOLA -· (Civil Jurisdiction) _l_' . .,,,. . r ,. c,.r . - t,;; I :. ' • ~. I BETWEEN: ' \ \ t,,. ..- . (' ("' ... ,, ZAMBIA NATIONAL BUIL APPELLANT AND ALFRED SWESHA MUSONDA 1ST RESPONDENT STEPHEN MATEYO 2 ND RESPONDENT CORAM: Mambilima, CJ, Malila and Kajimanga JJS On 3rd December 2019 and 9th December 2019 FOR THE APPELLANT: Mr. R. Ngulube of Messrs Tembo, Ngulube & Associates FOR THE RESPONDENT: Mr. B. Gondwe of Messrs Buta Gondwe & Associates JUDGMENT Kajimanga, JS delivered the judgment of the court. Cases referred to: 1. Indo Zambia Bank Limited v Mushaukwa Muhanga (2009) Z.R. 266 2. James Mankwa Zulu and Others v Chilanga Cement - Appeal No. 12/2004 3. ZIMCO Limited (In Liquidation) and Another v Micheal Maliswa and 17 Others - Appeal No. 139/2002 4. Deelay v Briton Rail Engineering Limited [1980] IRLR 147 5. Ferguson v Davis [1997] 1 All ER 327 J2 6. Halfden Grieg & Co A/S v Sterling Coal Navigation Corporation and Another [1973] 1 All ER 555 7. John Lee and Son (Grantham Limited v Railway Executive [1949] 2 All ER 581 8. Wilson Masauso Zulu v Avondale Housing Project (1982) Z.R. 172 Legislation referred to: Income Tax Act Chapter 323 of the Laws of Zambia, Section 2( 1) Other works: 1. Edgar, S.G.G. (1971). Craies on Statute Law, 7th Edition. London Sweet & Maxwell 2. Cambridge Business English Dictionary 3. Lockton, D.J. (1996). Employment Law, 2nd Edition. London: Palgrave Macmillan 4. Webb, J. (2006). Penguin's Dictionary of Law, 1st Edition. London: Etica Press 5. Chitty on Contracts, Volume 1 (27th Edition) 1994 6. Chitty on Contracts, Volume 1 (29th Edition) 2004 Introduction 1. In this appeal, the appellant is assailing the judgment of the trial judge (G. S. Phiri, J as he then was) handed down on 25th February 2013, which granted the respondents' claims against the appellant for underpayment of their redundancy and long service gratu ity. 2. The qu estion addressed by this appeal is whether the words "basic salary'' as defined and applied in the respondents' J3 corporate terms and conditions of service included or excluded allowances. Background to the appeal 3. The brief facts of the case are that the 1st and 2nd respondents were employees of the appellant until their services were terminated by way of redundancy on 1st August 2005 and 1st September 2005 respectively. The respondents were both paid their redundancy packages and long service gratuity whose computations were based on their basic salaries and excluded allowances. Aggrieved by this state of affairs, the respondents instituted proceedings against the appellant in the court below. Pleadings before the High Court 4. By their originating summons dated 4th September 2009, the respondents claimed: 4.1 Judgment or an order against the respondent in the sum of Kl,198,273,153 (unrebased) being under payment of their redundancy and long service gratuity; 4.2 Interest; 4.3 Costs; 4.4 Any other relief the Court may deem fit. J4 5. The basis of the claim was that the omission of allowances in the computation of their redundancy package and long service gratuity resulted in a gross underpayment as follows: a) 1st Respondent Redundancy payment: K366,547,507.13 (unrebased) 1. Long service gratuity: K203,634, 170.63 (unrebased) 11. b) 2nd Respondent Redundancy payment: K393,358,244.18 (unrebased) 1. Long service gratuity: K234, 733,231.88 (unrebased) 11. 6. The appellant denied the claim and contended that clause 36.3 of the respondents' conditions of service provided for a formula for calculating long service gratuity which was religiously adhered to by the respondent and that clause 36.4 expressly leaves no ambiguity by providing that the last drawn monthly basic salary shall be the amount used. Further, that in the computation of the redundancy packages, the respondent complied with the terms and conditions set out in clause 45.0 of the said conditions of service which had a provision that expressly states that it is the last drawn basic salary to be used. JS 7. In reply, the respondents asserted that the appellant did not use the right formula in the compu tation of their redundancy packages and long service gratuity due to a misconstruction of the meaning of the words "last drawn monthly basic salary'' as contained in clause 2.3 of their conditions of service. 8. On 28th June 2010, the parties filed a settlement of issues and statement of agreed facts. The question that was posed for the determination of the court below was whether the legal position on interpretation of the words "basic salary" as defined and applied in the respondents' corporate terms and conditions of service, included or excluded allowances. Consideration of the matter by the Learned Trial Judge 9. After considering the affidavit evidence and arguments advanced by the parties, the learned trial judge found that a narrow interpretation of the words "basic salary'' would unfairly disadvantage the respondents when they did not opt for voluntary redundancy but that it was the respondent, as their employer, which declared them redundant and decided to pay them their terminal benefits. J6 10.He observed that there was a plethora of decisions of this court relating to the issue of payment of redundancy packages and gratuity and that it is now settled law that allowances are included as perquisites when employment terminates without the fault of the employee. That is to say, wherever the word salary is mentioned in the terms and conditions of service, it includes allowances for purposes of calculating terminal benefits for an employee who is retired or declared redundant. 11.He noted that the pay slips exhibited by the respondents show a breakdown of what they received as basic pay and allowances which were paid to them on periodical basis and that this was the reason why the allowances were included in the pay slips. Consequently, he found that the respondents had a valid claim and entered judgment in their favour accordingly. The grounds of appeal to this Court 12. It is against this judgment that the appellant has now appealed to this court on three grounds as follows: "12.1 The learned trial judge erred in law and fact in failing to take into account and restrict the definition of "basic pay" to the one defined in the corporate terms and J7 conditions of service applicable to the parties. 12.2 The learned trial judge erred both in law and fact in departing from the definition of "basic salary" contained in the corporate terms and conditions of service on the basis that the respondents did not voluntarily opt for voluntary redundancy when the corporate terms and conditions of service did not prescribe any conditions for defining "basic salary". 12.3 The learned trial judge erred both in fact and in law in insisting on the general definition of salary interpreting the redundancy pay when the corporate terms and conditions of service specifically stipulated that same must be based on "basic salary". The arguments presented by the parties 13 .Both parties filed heads of argument on which the respective counsel for the parties indicated that they would entirely rely. In support of ground one, the learned counsel for the appellant submitted that the determination of this ground of appeal and effectively the substantive appeal itself, hinges on the interpretation of the phrase "basic salary" or "pay'' as intended and envisaged by clause 36.4 and 45 of the respondents' corporate terms and conditions of service and pay slips on record. It was his contention that in the interpretation of contracts of employment J8 such as in the present case, the intention of the parties thereto be inferred or deduced from the words used in such a contract. In support of this proposition, he relied on the learned author of Craies on Statute Law, 7th Edition who states at page 8 as follows: "In the construction of a contract there cannot be said to be any rule of law applicable, but the governing principle is to ascertain the intention of the parties to the contract through the words they have used, which words are to be taken in the sense which the common usage of the mankind has applied to them in reference to the context in which they are found." 14. We were also referred to the case of Indo Zambia Bank Limited v Mushaukwa Muhanga1 where this Court held as follows: "In trying to ascertain whether the appellant had any intention to pay gratuity to Zambian staff on permanent and pensionable establishment in this case, we will be guided by the conduct of the parties." 15. Counsel argued that clauses 36.4 and 45 of the respondents' corporate terms and conditions of service clearly indicate that the basic salary would be used to calculate the terminal benefits in issue. The question therefore was what did the parties intend and contemplate the words "basic salary" to mean? This question, he contended, can only be answered by having regard to the corporate J9 terms and conditions of service as read together with the conduct of the parties in their employment. 16. It was pointed out that clause 2.3 of the corporate terms and conditions of service refers to a starting salary stated in the letter of appointment/ contract or such amount as the appellant may agree upon from time to time. However, the record does not have a copy of the letter of appointment or contract which was made after the promulgation of the revised corporate terms and conditions of service which replaced the ZIMCO conditions of service. Therefore, the appellant was left with no option but to rely on the contents of the pay slip which forms an integral part of an employees' terms and conditions of service. 1 7. Counsel submitted that a cursory look at the 1st respondent's pay slip for July 2005 shows that he was entitled to a basic salary in addition to other allowances. In short, "basic pay'' 1n the respondents' corporate terms and conditions of service did not include allowances as it referred to a stand-alone specific amount. He referred us to the Cambridge Business English Dictionary no which defines basic salary as: "The amount of money that someone earns every year in their job, not including any extra payments they may receive." 18. Our attention was also drawn to section 2(1) of the Income Tax Act Chapter 323 of the Laws of Zambia which defines "basic salary'' as follows: "Basic salary means the gross amount payable to an employee without any allowances." 19. He contended that applying the above definitions of basic salary or pay, it is abundantly clear that the same does not include allowances and hence the appellant deliberately pre-fixed salary with the word basic to culminate into a phrase known as basic salary. He added that section 2(1) of the Income Tax Act which is statutory law, is explicit and there can therefore be no room for further interpretation; it simply says without any allowances. We were further referred to Cambridge Business English Dictionary which defines the term "basic" as follows: "Simple and not complicated, so able to provide the base or starting point from which something can develop." 20. From the foregoing, it was argued, the words "basic salary'' when Jll used in employment contracts simply refer to a salary which does not include allowances that may complicate the actual amount which is taken as a salary without allowances. That if the word "salary'' was used in the respondents' corporate terms and conditions of service as a basis for calculating terminal benefits, the appellant would have easily conceded. However, in the present case, what was used as the basis for calculating terminal benefits was described as "basic salary'' and not "salary'' as erroneously found by the trial court and this is what distinguishes this case from other previously decided Supreme Court cases on the legal definition of salary. 21. Counsel submitted that the respondents' contention that a "salary" which has been judicially defined to include allowances should have been used to calculate their terminal benefits is misplaced and flies in the teeth of what the parties agreed by the corporate terms and conditions and executed in practice as evidenced by the pay slip. That whilst he agreed that there is a plethora of authorities on the interpretation of the word "salary'', it was his contention that the definition which includes allowances should be used indiscriminately. According to him, in the case of J12 James Mankwa Zulu and Others v Chilanga Cement2 the , Supreme Court found in favour of the appellants because what was used in their conditions of service, as the basis for calculating terminal benefits, was "salary'' and not "basic salary''. That this position was earlier buttressed in the case of ZIMCO Limited (In Liquidation) and Another v Micheal Maliswa and 17 Others3 where it was held that: "In our considered opinion if the Respondents were entitled to club membership and a social tour, whether a one-off payment or not they were still benefits which had to be incorporated in a salary for purposes of calculating terminal benefits. This is so because fringe benefits have a value. Thus, when computing the true earnings or true loss of earnings, they have to be taken into account." 22. Counsel argued that as sound as the foregoing authorities may be, they do not apply to the facts in the present case in that in those cases, the Supreme Court dealt with matters which invoked the legal definition of the word "salary'', whilst in the present case what is in contention is the legal definition of the words "basic salary". He submitted that there is a sharp distinction between the words "salary" and "basic salary''. A "salary" incorporates allowances when it comes to computation of terminal benefits. On the contrary, the words "basic salary'' do not incorporate allowances J13 as can be deduced from the 1st respondent's pay slip. This pay slip outlines a separate and distinct amount for "basic salary" which is then followed by allowances. That in short, the "basic salary" and allowances were intended and envisaged by the parties to be exclusive of each other and not integral. 23. It was counsel's contention that what the trial court did by failing to distinguish between "salary" and "basic salary" was to re-write the employment contracts of the respondents. He referred us to the learned author of Employment Law who in quoting with approval the case of Deelay v Briton Rail Engineering Limited4 , had this to say: "Apart from the above, express terms usually cause no problems and can help both parties because they cannot be ousted by implied terms." 24. Applying the above proposition of law to the present case, he argued that the respondents' corporate terms and conditions of service were abundantly clear that the "basic salary" would be used to compute the terminal benefits. Thus, the "basic salary'' as defined by clause 2.3 of the corporate terms and conditions of service was the starting salary in the letter of appointment/ J14 contract or such amount as the appellant may agree upon from time to time. That as can be noted, the amount to be agreed from time to time can be deduced from the pay slip which clearly shows what the basic salary was and the attendant allowances. As such, counsel argued, the basic salary was paid as a stand-alone amount, separate and distinct from the allowances. 25. Counsel accordingly urged us to allow the appeal as the facts are fundamentally different from the Supreme Court cases cited on the legal definition of "salary" because the present case deals with the legal definition of the words "basic salary'' and not otherwise. 26. In response, the learned counsel for the respondents submitted that the appellant has not addressed the fact that "basic salary" has been defined in the corporate terms and conditions as "salary" and thus it leaves no doubt as to the way the term "basic salary" should be understood or construed. He referred us to the learned authors of Chitty on Contracts, Volume 1 (27th Edition) who state at paragraph 12-040 that: "If the parties have themselves furnished the key to the meaning of words used it is not material by what expressions they convey their intention." J15 27. He, therefore, submitted that it is immaterial that the term "basic salary'' was used as long as the same was defined and there is no need to depart from the very key which has been supplied by the parties themselves nor to supply one when one has been given and thus the meaning of "basic salary" in the conditions of service should be the definition given in the document itself. 28. He also argued that the reference by the appellant to basic pay is misplaced as the operative term which the court is being called to adjudicate upon is "basic salary" and it has been defined by the parties. That there is no definition in the corporate conditions to the effect that "basic salary'' shall be exclusive of allowances other than the fact that it shall be the starting salary and as agreed from time to time. It was his contention that the key as used in the document itself will have to be the determining factor. According to counsel, the 1st respondent's pay slip on record makes reference to salary and itemizes what is to be comprised in salary. Therefore, the attempt by the appellant to restrict the meaning of "basic salary" to basic pay is in the circumstance not tenable. J16 29. He further submitted that the reference to Craies on Statute Law is misconceived as it is a well settled principle that the construction of a contract is a question of law. He further referred us to paragraph 12-041 of Chitty on Contracts which states that: "The construction of written instruments is a question of mixed law and fact. This includes two things, first, the meaning of words; and secondly, their legal effect." 30. It was argued that the meaning of the term "basic salary'' has been supplied and the legal effect of the term salary is one which the court in Zambia have decided and have clearly stated that there is now no debate. The James Mankwa Zulu2 case was cited in support. Reliance was also placed on paragraph 12-045 of Chitty on Contracts which states that: "The rule is that technical words must have their technical meaning given to them unless something can be found in the context to exclude it." 31. Counsel contended that there is nothing in the context used in the appellant's corporate conditions to suggest a different meaning to salary and that the term salary should therefore be afforded its meaning and import or indeed the construction of basic salary as defined in the corporate conditions. On the question of legal J17 interpretation, our attention was drawn to the case of Ferguson v Davis5 where it was stated that: "The interpretations of letters and other documents is a matter for the court and in that sense it is a question of law." 32. We were also referred to Halfden Grieg & Co A/S v Sterling Coal Navigation Corporation and Another6 where it was held that: "The true construction of a document is a question of law and the ultimate arbiters on question of law are the courts." 33. It was, therefore, submitted that the parties having themselves expressly defined the meaning of basic salary, it becomes otiose to be stating that the term salary should have been u sed. In the circumstances, the Deelay v Briton Rail Engineering Limited4 case cited by the appellant actually supports the respondents' case in the principle it enunciates that express terms cannot be ousted by implied terms. That the parties themselves having defined the term "basic salary", it cannot be opened to debate or conjecture or indeed interpretation by conduct. 34. Counsel argued that it cannot be conceived under clause 36.3 that the reference to month's salary in each of the formulae meant pay without allowances or under clause 45 (iii), three month's pay in J18 lieu of notice meant pay without allowances. This quite clearly was not the case as salary in lieu of notice is always paid with allowances, which further disproves the appellant's contentions. He contended that the appellant is trying to misapply the James Mankwa Zulu2 case insofar as it defines salary which is also the way basic salary in the present case has been defined. That nowhere do the corporate conditions ever define or use the term basic pay as the operative term and thus the attempt by the appellant to distinguish between basic pay and salary is misplaced and amounts to making material an expression not even used and is a departure from the corporate conditions which was the basis of the contract applicable to the parties. 35. It was argued that the appellant now wants to seek refuge in what they term the conduct of the parties and want to deduce from the pay slip that basic salary was equivalent to basic pay as shown in the pay slip which leads itself to two difficulties. Firstly, no oral evidence was given by either party to bring such understanding as the parties agreed to settle the matter via settlement of agreed facts and thus such a position is being made unilaterally by the J19 appellant. Secondly, the respondents produced the pay slip to show that salary meant basic pay and allowances. 36. On the question whether the use of the term "basic salary" means payment of the amount of money someone earns in a job without extra payments, it was submitted that this may well be referring to such things as commissions or even indeed overtime or other bonuses or salary and shares for executive directors. 37. _Further, that in the event that an ambiguity as to the intention of the parties on the words used lingers, that is, whether the interpretation is salary without allowances or with allowances, he contended that the clause be construed against the grantor, in this case being the appellant, as per the contra proferentum rule which requires that the words of an instrument shall be taken more strongly against the party employing them. That the import of this rule according to the learned authors of Chitty on Contracts, is that a deed or instrument shall be construed more strongly against the grantor or maker thereof. Our attention was then drawn to the case of John Lee and Son (Grantham) Limited v Railway J20 Executive7 where it was stated that: "We are presented with two alternative readings of this document and the reading which one should adopt is to be determined, among other things, by a consideration of the fact that the Defendants put forward the document. They have put forward a clause which is by no means free from obscurity and have contended .... that it has a remarkably wide scope and I think the contra proferentum should be applied ... " 38. Counsel argued that the implication of this rule of construction is clear; the respondents are not the maker of the contract or contractual provisions under scrutiny. However, the appellant would wish to give it a narrow interpretation than the interpretation in the operative term or definition but any ambiguity as to the implications, extensions or scope of the provision must be construed against the maker. The Indo Zambia Bank1 case (supra) was cited in support. 39. Relying on the case of Wilson Masauso Zulu v Avondale Housing Project8 counsel submitted that the appellant's position in this , matter is untenable and unjustified and urged us to dismiss the appeal. 40. In reply to the respondents' heads of argument, counsel for the J21 appellant submitted that the inference to be drawn from the provisions of clause 2.3 of the corporate terms and conditions of service is that the parties were at liberty to discern or deduce what constituted "basic salary'' from the letter of appointment, contract or what the parties could agree from time to time. However, the record does not have the respondents' appointment letters or ·. contracts which are in contemporaneity with the 1st respondent's pay slip on record. Consequently, the only option left for the appellant is to rely on the said pay slip as the latest document supplying the parties with the definition of basic salary which they could agree from time to time. According to counsel, a cursory perusal and dissection of the said pay slip clearly shows that it has a separate provision for payments of basic pay from other payable allowances, which includes, inter alia, education, security, housing and fuel allowances. As such, the corporate terms and conditions of service clearly defined what constituted "basic pay'' and it was open for everyone to see that "basic pay'' was a defined monthly amount of money accorded to the respondents exclusive of all other payable allowances. J22 41. Turning to the question of whether or not the terms "basic pay'' · and "basic salary'' have the same meaning and import, counsel contended that the term "basic pay" is generic in nature and therefore, can be used interchangeably with basic salary as contemplated by the parties. This, it was argued, was because certain clauses in the corporate terms and conditions of service had used these words interchangeably. A striking example was the respondents' entitlement to housing allowance provided under clause 12 which read as follows: "12.1 All employees (married women included) who have not been provided with society accommodation will qualify for housing allowance as follows: Grades Housing Allowance per month Sl-S8 50% of basic salary The housing allowance shall be taxable" [Emphasis theirs] 42 .. It was argued that clause 12.1 clearly shows that housing allowance was paid at the rate of 50% of the basic salary and that a cursory examination of the pay slip on record indicates that the amount payable to the 1st respondent as housing allowance was Kl,334,233.50 (unrebased). Therefore, it was contended, there J23 was an interchange of the use of the words "basic salary" and "basic pay'' in this context as used under clause 12 and on the pay slip. That simple arithmetic demonstrates and proves that this amount was 50% of the basic pay of K2,668,467.00 (unrebased). 43. Counsel pointed out that other examples where the words "salary'' or "pay'' are/were used interchangeably by the parties can be deduced from clause 36.0 particularly under clause 36.3 on computation of long service gratuity which shows that for the first 10 years of service, the appellant was obliged to pay half month's pay for each year of service whilst, for the next 10 years of service, one month's salary for each year of service in excess of 10 years. 44. Counsel submitted that there is no evidence on record that the respondents ever protested against the appellant's conduct of computing housing allowance on the basis of the basic pay as indicated on the pay slip. In the absence of such evidence, the only reasonable inference to be drawn is that the respondents were aware that the term "basic pay'' as used in their respective pay slips and "basic salary'' as used under clause 12 .1 of the corporate terms and conditions of service imported the same meaning and J24 effect. Therefore, the appellant sees no ambiguity in the conditions of service that would entitle the court to interpret the same in favour of the respondents. 45. Counsel referred us to the learned authors of Chitty on Contracts, Volume 1, (29th Edition) who, at paragraph 12-002, had this to say about the principle that governs the parties understanding of a written document: "Where the agreement of the parties has been reduced to writing and the document containing the agreement has been signed by one or both of them, it is well established that the party signing will ordinarily be bound by the terms of the written agreement whether or not he is ignorant of their precise legal effect." 46. In reliance of the above proposition of law, he contended that it is immaterial whether or not the respondents understood the legal . : effect of the words "basic salary'' and "basic pay"; what was important to determine is the legal effect of the words themselves on the totality of the facts of this case. Therefore, counsel argued, the words "basic salary" and "basic pay" have the same meaning, import and legal effect and the respondents' argument that these two sets of words are different is misconceived and misplaced. J25 4 7. He then drew our attention to the case of Gilbert Himbayi Hamalambo v Zambia National Building Society9 where this court in dismissing the appellant's appeal on the question whether the allowances could be merged with the basic salary stated as follows: "We note that the Court below came to the conclusion that the Appellant was not entitled to have his benefits computed in accordance with the Zimco conditions of service. We agree with the Court below because the Zimco conditions of service were superseded when the Respondent revised its conditions of service in 1998 ... " 48. Counsel accordingly prayed that the judgment of the lower court be reversed with costs to the appellant. Consideration of the matter by this court and decision 49. We have considered the record of appeal, the judgment appealed against and the arguments of the parties. 50 ..A s the three grounds of appeal are interrelated, they will be determined together. The gist of these grounds is that the lower court departed from the definition of "basic salary'' contained in the corporate terms and conditions of service applicable to the J26 • parties by insisting on the general definition of salary as interpreting the respondents' redundancy pay and long service gratuity. 51. The thrust of the appellant's contention is that the words "basic salary" as defined by the corporate terms and conditions of service do not incorporate allowances as evidenced by the 1st respondent's . pay slip which shows that the basic salary was paid as a stand alone amount, separate and distinct from the allowances. 52. The respondents on the other hand contend that there is no definition in the corporate terms and conditions of service which says that "basic salary" shall be exclusive of allowances and that · . the 1st respondent's pay slip makes reference to "salary'' and itemizes what is to be comprised in it. Thus, the appellant's attempt to restrict the meaning of "basic salary" to "basic pay" is not tenable. 53. The question for our determination 1n this appeal is, therefore, simple. The issue is whether the appellant used the correct formula in the computation of the respondents' redundancy pay and long service gratuity. This hinges on the interpretation of the .. J27 appellant's corporate terms and conditions of service, and in particular the term "basic salary" as defined and applied in clauses 36, 45 and 2.3 of the said conditions of service. 54. Clause 36 reads as follows: "36.0 LONG SERVICE GRATUITY 36.1 Eligibility Only those employees who have a minimum of ten years continuous service within the Society (or former ZIMCO GROUP) shall be eligible and further the Long Service Gratuity shall be payable only in the following circumstances: - (i) Normal retirement (ii) Death while in service (iii) Retirement on medical grounds (iv) Voluntary or early retirement at the request of the Society. 36.2 The Long Service Gratuity shall not be payable on resignation or dismissal of the employee. 36.3 In computing the eligible service" the service under any other public sector or parastatal institutions (Civil Service, Statutory Board and former ZIMCO Group) will be included. However, the Long Service Gratuity shall be payable only for those number of years served within the society or under former ZIMCO Group. THE LONG SERVICE GRATUITY PAYMENT SHALL BE AS FOLLOWS: For the first 10 years of service - half month's pay for ' J28 Within the Society (ZIMCO each year of service Group included For the next 10 years of service - One month's salary for ( 11-20 years) each service in excess of 10 years For the next 10 years of service - One and half month's (21-30 years) salary for each year of service in excess of 20 years For service in excess of 30 years - Two months' salary for each year of service in excess of 30 years 36.4 In computing the long service gratuity the last drawn monthly basic salary shall be the amount to be used. 36.5 The Long service gratuity shall be tax free. Accordingly, tax payable if any shall be borne by the Society. [Emphasis added] 55_.. And clause 45 provides that: "When due to circumstances beyond the Society's control redundancy is inevitable, the Society after obtaining approval from the Board and informing the Ministry of Labour, may effect redundancy based on the principal of first in last out and last in first out taking into consideration the employee's age, experience, educational qualifications and vocational training, conduct and disciplinary record, efficiency and effectiveness and commitment to duty. Redundancy payment shall be as follows:- (i) Twenty four (24) months pay plus one month's salary inclusive for each completed year of service. J29 (ii) Affected employees to be paid in lieu of repatriation inclusive of baggage as may be determined by Management from time to time. (iii) Three months pay in lieu of notice. (iv) Affected employees to occupy Society accommodation rent free for four (4) months after last shift or to be paid housing allowance covering four months. (v) In addition to the above employees who have served within the Society or former ZMCO Group for a minimum of ten (1 0) years of continuous service will be entitled to a Long Service Gratuity. The redundancy pay shall be in addition to the applicable salary in lieu of notice and in addition to any other contractual terminal benefits. The last drawn basic salary shall be the basis for calculation of the redundancy pay." [Emphasis added] 56. The import of clauses 36 and 45 is that the respondent's long service gratuity and redundancy payments were to be calculated on the basis of their last drawn basic salary. The words "basic salary" were defined in clause 2. 3 as follows: "Basic Salary: Means the starting salary stated in the letter of appointment/ contract or such amount as the Society may agree upon from time to time." J30 5 7. Appearing at page 7 4 of the record of appeal is the 1st respondent's letter of appointment. The relevant portions of this letter are reproduced hereunder as follows: "Please refer to your application dated 15th August, 1977; We are pleased to offer you employment in the position of a Cashier, Zambia National Building Society - Northern Area, on the following terms and conditions: - a) EMPLOYMENT: Employment to commence on 17th October, 1977 with an initial three months probationary period. b) SALARY: Salary will be Kl,776 p.a. in Scale S.14. There will be an annual salary review at the end of each year provided satisfactory progress has been made. c) LEAVE ENTITLEMENT: You will be entitled to 30 working days leave per year which can be an annual salary review at the end of each year provided satisfactory progress has been made. d) ACCOMMODATION: You will be entitled to KS.SO Housing allowance whilst not in occupation of Society house ..." 58. From the foregoing, there can be no doubt that the 1st respondent's starting salary of K 1,776 per annum was exclusive of the housing allowance in his initial letter of appointment. The record indicates that the 1st respondent was later appointed to the position of J31 Finance Manager Operations sometime 1n December 2003. The letter in respect of this appointment states in part that: "In accordance with the Corporate Terms and Conditions of Service your salary has accordingly been adjusted from K16 029 344.00 to K16 161 344.00 per annum in job grade 7. You will however be on probation of six months prior to confirmation and review of your salary. You will also be entitled to the fringe benefits which are obtaining in the new grade." [Emphasis added] 59. It is clear from this letter of appointment that the 1st respondent's annual salary of Kl6,161,344.00 did not include fringe benefits. Common examples of fringe benefits include, among others, hou sing allowance. We therefore posit that the fringe benefits being referred to in this letter include allowances. We say so because the 1st respondent's annual salary of Kl6,161,344.00 in job grade 7 entailed that his monthly salary was in the range of K 1,346,778. A look at the 1st respondent's pay slip of July 2005 shows that he still fell within the category of job grade 7 and that the pay rate was K2,668,467.00. This sum also appears as his basic pay which is exclusive of the allowances indicated on his pay slip. 60. Our view, therefore, is that the term "basic salary'' in the corporate r J32 terms and conditions of service did not include allowances. As we see it, the use of the words "basic salary'' in clauses 36 and 45 of the conditions of service as opposed to "salary'' suggests that the allowances were excluded. Had the appellant intended that the computation of redundancy pay and long service gratuity were to include allowances, they would have simply referred to "salary" and not "basic salary'', as is the case with clause 25 of the conditions of service which provides for gratuity. Paragraph (iii) of this clause states that: "Gratuity will be 35% of the last drawn salary and leave commutation if any." [Emphasis added] 61. Thus, it is plain that there was a distinction between "salary" and "basic salary" in the corporate terms and conditions of service. We agree with the appellant that by failing to distinguish the terms . "salary" and "basic salary", the lower court essentially introduced different conditions than those agreed between the parties. We also agree that the conditions of service in the James Mankwa Zulu2 case, which the lower court relied on in arriving at its decision, made reference to "salary" as the basis for calculating terminal benefits and not "basic salary". J33 62. As aptly submitted by the appellant's counsel in response to a clarification sought by the court during the oral hearing, the James Mankwa Zulu2 case related to matters that arose under the ZIMCO conditions of service which included the salary in the calculation of terminal benefits whereas, this case was dealing with the appellant's revised 1998 corporate terms and conditions of service. These conditions of service stated in the preamble as follows: "The Zambia National Building Society after operating under quasi ZIMCO Conditions of Service has decided to revise its Conditions of Service to suit its status as an independent institution in relation with its operations." 63. The question the lower court was faced with was not the determination of the meaning of the word "salary" but rather, the words "basic salary''. The learned trial judge, therefore, misdirected himself when he used the general definition of salary in interpreting clauses 36 and 45 of the conditions of service applicable to the parties. 64. In the case before us, the parties had clearly stipulated that the long service gratuity and redundancy pay would be based on the J34 last drawn basic salary and that was what was paid to them. We are, Lherefore, satisfied that the appellant used the correct formula li.1 computing the respondents' redundancy pay and long service gratuity when it excluded the allowances in the calculation of the said terminal benefits. 65. It was contended by the respondents that any ambiguity arising from the interpretation as to whether or not the basic salary included allowances should be construed against the appellant which n1ade the corporate terms and conditions of service as per the contra proferentum rule. Contrary to the respondents' assertion we do not find any ambiguity in the interpretation of the term "basic salary". In our view, the sole meaning of this term as defined in clause 2 .3 of the corporate terms and conditions of service is ". .. the starting salary stated in the letter of appointment contract. .. " and this does not, by any stretch of imagination, include allowances. Conclusion 66. For these reasons, we conclude that the appeal has merit. In the result, we allow the appeal and set aside the judgment of the lower J35 c,osts co~iL;t, shall follow the event and to be taxed in default of ~ --~~ ,,' . «~Ji ment. \. I. C. MAMBILIMA CHIEF JUSTICE :::::-? --M. MAL ILA SUPREME COURT JUDGE C. KAJi'MANGA SUPREME COURT JUDGE