One Life Assurance Zambia Ltd v Wankumbu Sichivula and Anor (Appeal No. 111/2023) (2 September 2025) – ZambiaLII

.. IN THE COURT OF APPEAL OF ZAMBIA Appeal No. 111/2023 HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: ONE LIFE ASSURANCE ZAMBIA LTD APPELLANT AND WANKUMBU SICHIVULA 1 RESPONDENT ST MUTALE MWANGO RESPONDENT 2ND Coram: Kondolo SC, Majula and Muzenga, JJA On 22nd May, 2025 and 2nd September, 2025 For the Appellants: Mr. P. Chomba with Mrs P. Mukwemba, both ofM essrs Mulenga Mundashi Legal Practitioners For the Respondents: Ms. N. Banda with Ms. M. Kalaba-Mwansa, both of AMW & Co Legal Practitioners. JUDGMENT MAJULA JA, delivered the Judgment of the Court Cases referred to: 1. National Milling Co. v Grace Simataa (2000) ZR. 91 2. Chilanga Cement Plc v Kasote Singogo (2009) Z.R. 12 3. Barclays Bank Zambia Plc v Luwi & Ngulube, SCZ Appeal No. 07 of 2012 4. ZESCO Ltd v Patricia Kabwe Lungu (SCZAppeal No. 236 of2013) J2 5. Albert Mupila v Yu-Wei COMP/IRCLK/ 222/ 2021 6. Lesney Products Ltd v Nolan (1977) JCT 235 (CA) 7. Johnson v Nottinghamshire (1974)1 All ER 1082) 8. Derek Mukokanwa v Development Bank of Zambia (SCZ Appeal No. 120 of2014) 9. Attorney General v Katwishi Kapandula (1988-1989) Z.R. 69 (SC) 10. Mwangala Nyambe v PriceWaterhouseCoopers Ltd, Appeal No. 155/ 2014 11. Sarah Aliza Vehknik v Casa Dei Bambini (Appeal No. 129/ 2017) 12. Mark Tink & 6 Others v Lumwana Mining Co. Ltd (Appeal No. 41/ 2021) 13. Eston Banda v Attorney General (Appeal No. 42/ 2016) 14. Caroline Daka v ZANA CO, 2008/H P/ 0846 15. Redrilza Ltd v Abui d Nkazi (2011) Vol. 1 Z.R. 3 94 (SC) 16. Daka v ZCCM (SCZ Appeal No. 117/ 1997) 17. Mashabela v National Breweries (SCZ Appeal No. 23/ 1999) 18. ZESCO Ltd v Edward Kahale (Appeal No. 37/ 2020) 19. Josephat Lupemba v FQM Ltd (Appeal No. 120/2017) 20. Zambia Ainvays v Gershom Mubanga (1992) S.J. 24 21. KCM v Greenwell Mulambia (SCZAppeal No. 053/ 2013) 22. Chansa Ng'onga v Alfred H. Knight (Z) Ltd, SCZ Judgment No. 26/ 2019 23. Zamtel v Shabwanga, Appeal No. 78/ 2016 24. Norris v Brown & Boot No. 15-7404 25. Van Der Velde v BDS (Pty) Ltd (Case No. JS371/ 03) 26. Abernethy v Mott, Hay & Anderson (1974) ICR 323 27. Decision Survey (Pty) Ltd v Dlamini (1999) 5413 (LAC) 2 8. SA CTWU v Discreto (19 98) ZALA C 9 29. Zambia National Commercial Bank v Mweemba (Appeal 92 of 2015) 30. GDC Logistics Zambia Ltd v Kanyata & Others, Appeal No. 144/ 2014· 31. African Banking Corp v Muntete {Appeal No. 51/ 2021) 32. Barclays Bank v Luwi & Ngulube (SC Appeal No. 07/ 2012) 33. Swarp Spinning Mills v Chileshe (2002) ZR 23 34. Dennis Chansa v Barclays Bank (SCZ Appeal No. 111/ 2011) 35. Y.B. & F. Transport Ltd v Supersonic Motors Ltd (SCZ J. No. 3/ 2000 J3 36. Mutale v ZCCM (1994) S.J. 67 37. Miller v Minister of Pensions (1947) 2 All ER 372 38. Aveng Trident Steel (2019) ZALAC 36 39. FA WU Oba Kapesi & Others v Premier Foods Ltd t/ a Ribbon Salts River (2010) ZALC 52 {SA} 40. First National Maintenance Corp. v NLRB 452 U.S. 666 (1981) 41. Peter Allan Mbewe v Workers Compensation Fund Control Board & The Attorney General, Appeal No. 61 of 2014 42. Care International Zambia Ltd v Misheck Tembo, Selected Judgment No. 56 of 2018 43. Attorney General v D.G. Mpundu (1984) Z.R. 6 44. Hayward v Pullinger & Partners Ltd (1950) 1 All ER 581 45. Continental Restaurant and Casino Ltd v Arida Chulu (2000) Z.R. 128 46. Gastove Kapata v The People (1984) Z.R. 4 7 4 7. Shamwana v The People (1985) Z.R. 41 48. Zambia National Commercial Bank Plc v Joseph Kangwa, Appeal No. 544 of2008 49. Joseph Chitomfwa v Ndola Lime Ltd (1999) Z.R. 172 50. Barclays Bank Zambia Ltd v Manda Chola & Ignatius Mubanga (1997) S.J. 35 51. Pius Chilufya Kasolo v ZCCM, Appeal No. 185/ 2022 52. Citibank Zambia Ltd v Suhayl Dudia, CAZ Appeal No. 16 of 2020 53. Lumwana Mining v. Henry Nyambe & Others, CAZ Appeal No. 165 of Authoritative Text referred to: 1. Winnie Sithole Mwenda and Chanda Chungu A Comprehensive Guide to Employment Law in Zambia: Second Edition (2025) LexisNexis, South Africa J4 1.0 Introduction 1. 1 This appeal emanates from a decision of the Honourable Mr Justice E. Mwansa wherein the Court below upheld the Respondents' claims for redundancy benefits and damages for unfair dismissal on the basis that the restructuring did not meet the threshold of operational requirements under the Act. 1.2 This appeal has necessitated a careful examination of the law surrounding operational requirements under section 52(2) of the Employment Code Act, No. 3 of 2019 and the appropriate measure of damages where termination is found to be lawful. 2.0 Background 2.1 Mr. Wankumbu Sichivula (1st Respondent) and Mr. Mutale Mwango (2nd Respondent) were employed on permanent and pensionable terms by One Life Assurance Zambia Limited, formerly Metropolitan Life Zambia Limited. Mr. Sichivula served as Finance Manager from 13th May, 2020, and Mr. Mwango as Claims Manager from 1st August, 2019. 2.2 In 2020, the Appellant's ownership transferred from South African shareholders to Finsbury Investments Limited, a Zambian company, prompting a name change to One Life Assurance Zambia Limited. Following this, the Appellant initiated a restructuring exercise to phase out permanent JS contracts in favour of fixed-term contracts, with no loss of employment or abolition of positions. 2.3 On 13th and 19th October, 2021, the Appellant issued notices terminating the Respondents' permanent contracts under section 52 of the Employment Code Act, offering in their place new fixed-term contracts. Both Respondents declined the offers by emails dated 20th October, 2021 and 12th November, 2021, respectively, and ceased reporting for work after their notice periods. 2.4 The Appellant paid the Respondents' full salaries for October, 2021, prorated salaries for November, 2021, and all accrued benefits. On 23rd December, 2021, the Respondents, through their advocates, demanded severance packages under section 54(c) of the Employment Code. The Appellant rejected the claims, maintaining that the terminations were lawful and due to operational requirements. 2.5 The Respondents subsequently filed a Notice of Complaint before the Industrial Relations Division of the High Court seeking damages for unfair termination, redundancy packages, interest, and costs. The Appellant opposed the claim, reiterating that the terminations complied with applicable law. 2.6 Trial was conducted on 11th January, 2023, followed by the filing of final submissions. On 3rd February 2023, the High Court entered judgment in favour of the Respondents. J6 3.0 DECISION OF THE COURT BELOW 3.1 Upon review of the pleadings and evidence, the High Court, Industrial Relations Division, addressed two main issues: ( 1) whether the Respondents' termination amounted to redundancy; and (2) whether the cited operational requirements constituted a valid reason under the Employment Code Act, No. 3 of 2019. 3.2 On the first issue, the Court found that the Respondents were employed on permanent terms and were terminated on grounds of "operational requirements," after which they declined fixed-term contracts offered by the Appellant following a change in shareholding. The Respondents relied on Section 55( l)(c), claiming redundancy due to adverse variation of conditions. The Court rejected this, finding the case involved outright termination, not variation, and applied the reasoning in National Milling Co. v Grace Simataa,1 which holds that redundancy arises only where fundamental terms are unilaterally altered without consent. 3.3 On the second issue, the Court considered Section 52(2), which permits termination for valid reasons, including operational requirements. While recognising restructuring as a potential justification (per Chilanga Cement Plc v Kasote Singogo2 the Court held that a mere change in ownership, without evidence of operational necessity, did not meet the statutory threshold. The Appellant failed to show how J7 restructuring impacted business viability, and under Section 52(5), did not discharge its burden to justify the termination. 3.4 The Court concluded the dismissals were unlawful and unfair under Section 52(2) and, relying on Barclays Bank Zambia Plc v Luwi & Ngulube, 3 awarded each Respondent five months' salary in damages. No costs were awarded. 4.0 GROUNDS OF APPEAL 4.1 Dissatisfied, the Appellant filed an appeal to this Court, amending its Memorandum of Appeal on 25th April 2023. "l. That the learned tri.al Judge erred in law when it proceeded to render a Judgment on the matter despite its juri.sdiction having lapsed on account of the matter not having been concluded within one year from the date the Notice of Complainant was filed on 3rd February, 2022. 2. That the learned tri.al Judge erred in law and in fact when after having held on page 9 (paragraph 4.1 OJ of the Judgment that organizational changes may lead to termination of a contract of employment for operational requirements proceeded to reject the validity of the reason that had been given by the Appellant for terminating the Respondent contracts of employment against the weight of the evidence on the record. 3. That the learned tri.al Judge erred in law and in fact when he held on page J-10 paragraph 4.13 that the termination of the contracts of employment for the Complainants was not for bona fide commercial reasons and therefore in J8 breach of section 52(2) of the Employment Code Act. 4. That the learned trial Judge erred in law and fact when he held that the termination of the Complainant's contracts of employment amounted to unfair termination. 5. The learned trial Judge erred in law and in fact when he awarded the 1st and 2nd Respondents five (5) months' salary as damages for unfair and unlawful dismissal without any evidence on record to justify such an award and contrary to the established principle on award of damages in employment matters." 5.0 APPELLANT'S ARGUMENTS - Ground One 5.1 The Appellant challenges the trial court's finding that the Respondents' termination was not justified under Section 52(2) of the Employment Code Act, No. 3 of 2019, arguing it resulted from a bona fide restructuring following a full transfer of shareholding to Finsbury Investments Limited and the company's rebranding to One Life Assurance Zambia Ltd. 5.2 As part of this restructuring, permanent contracts were phased out and replaced with fixed-term contracts. The Respondents received termination notices citing operational requirements, were paid terminal benefits, and offered alternative employment, which they declined. 5.3 The Appellant contends that the trial judge erred in finding the restructuring commercially unjustified. Under Section 52(2), employers may terminate employment based on operational needs. In ZESCO Ltd v Patricia Kabwe Lungu, 4 J9 restructuring for efficiency was upheld as lawful, even where roles remained. Likewise, in Albert Mupila v Yu-Wei,5 restructuring was accepted as distinct from redundancy. 5.4 English authorities Lesney Products Ltd v Nolan6 and Johnson v Nottinghamshire7 affirm that efficiency-driven terminations are lawful. The Appellant also cites Derek Mukokanwa v Development Bank of Zambia8 where , restructuring was upheld despite the position continuing. 5.5 The Appellant submits that the terminations were commercially justified and lawful, not a disguised redundancy, and that the Respondents' claims were unsupported by evidence. 5.6 It prays that the appeal be allowed and the trial court's finding reversed. 6.0 APPELLANT'S ARGUMENTS - GROUND TWO 6.1 The Appellant challenges the trial court's finding of unfair termination under Section 52(2) of the Employment Code Act, No. 3 of 2019, arguing that both the substance and procedure of termination complied with contractual and statutory requirements. 6.2 It submits that the Respondents were terminated on valid operational · grounds, namely, restructuring following a change in ownership, and were given proper notice 1n accordance with their contracts. The Appellant paid all JlO terminal benefits, and the Respondents admitted in cross examination that notice was received and dues were paid. Citing Attorney General v Katwishi Kapandula,9 the Appellant argues that this unchallenged evidence proves compliance with the law. 6.3 Under Section 52(2), employers may terminate employment based on capacity, conduct, or operational requirements, provided the reason is substantiated. The Appellant relies on Mwangala Nyambe v PriceWaterhouseCoopers Ltd,10 where the Supreme Court held that valid notice and a legitimate reason suffice to meet the legal standard. 6.4 In Sarah Aliza Vehknik v Casa Dei Bambini11 and Mark Tink & 6 Others v Lumwana Mining Co. Ltd12 we held that employers must provide not just a reason but a substantiated one. The Appellant submits it met this burden by citing detailed restructuring measures, unlike cases where vague justifications were rejected. 6.5 It distinguishes between dismissal for misconduct and lawful termination based on contract. In Eston Banda v Attorney General,13 and Caroline Daka v ZANACO, 14 the courts clarified that unfair dismissal arises from discriminatory or unlawful conduct, not from contractual termination. Similarly, in Redrilza Ltd v Abuid Nkazi15 the Supreme Court held that where termination follows the contract, courts should not infer unfairness. Jl 1 6.6 Citing Sections 52(4) and 5(2) of the Employment Code and Section 108 of the Industrial and Labour Relations Court Act, the Appellant argues that no discrimination or statutory breach was pleaded or proved. Therefore, the finding of unfair dismissal lacked legal basis. 6. 7 In conclusion, the Appellant submits it acted lawfully and in good faith, and prays that the finding of unfair termination be set aside and the appeal allowed. 7.0 APPELLANT'S ARGUMENTS - GROUND THREE 7.1 The Appellant submits that the trial court erred in awarding the Respondents five months' salary each for "unfair and unlawful dismissal" without evidentiary or legal justification. It argues that the award contravenes settled principles on assessing damages in employment matters. 7 .2 First, the Appellant contends that the pleadings and evidence only supported claims for a redundancy package or, alternatively, damages for unlawful termination, not dismissal. Citing Redrilza Ltd v Abuid Nkazi15 it submits that dismissal typically follows disciplinary breaches, whereas termination can occur contractually. The trial court's reference to "dismissal" was thus a mischaracterisat ion. 7.3 Regarding the quantum of damages, the Appellant relies on Daka v ZCCM16 and Mahlwane Adries Mashabela v National Breweries Ltd7 where the Supreme Court held J12 that damages for wrongful termination are ordinarily limited to the contractual notice period, unless exceptional circumstances exist. 7.4 In ZESCO Ltd v Edward Kahale18and Josephat Lupemba v FQM Ltd19 appellate courts emphasized that any award exceeding the notice period must be grounded in evidence of hardship or trauma. Absent such factors, a departure from the common law measure is a misdirection. 7. 5 The Appellant argues that no such factors were established. The Respondents were offered re-employment on fixed-term contracts, which they voluntarily declined, resulting in no proven loss. Thus, the trial court's award lacked basis. 7.6 Further, under the principle of mitigation of loss, as ° reaffirmed in Zambia Airways v Gershom Mubanga2 KCM v Greenwell Mulambia21 and Chansa Ng'onga v Alfred H. Knight (Z), 22 an employee must take reasonable steps to reduce loss. Where re-employment is refused, compensation may be limited or denied. 7.7 The Appellant concludes that there was no evidence of undue hardship, psychological distress, or aggravating factors to warrant five months' salary. It prays that the award be set aside and replaced with damages consistent with the contractual notice period. J13 8.0 RESPONDENT'S ARGUMENTS-GROUNDS ONE & TWO 8.1 The Respondents support the trial court's finding that their termination was unlawful and unfair under Section 52(2) of the Employment Code Act No. 3 of 2019. They argue that the Appellant failed to prove a genuine operational reason, instead relying on a change in shareholding, an insufficient basis for termination. 8.2 They cite Sarah Aliza Vekhnik v Casa Dei Bambini11 and Zamtel v Shabwanga,23 to stress that reasons for termination must be valid and substantiated. The Appellant offered no concrete evidence of operational disruption and merely cited ownership change. 8. 3 Relying on Norris v Brown and Boot24 and Eric Van Der Velde v BDS (Pty) Ltd,25 the Respondents argue that terminations linked solely to ownership transfer, without job function change, are unfair. The offered contracts lacked key benefits, e.g., gratuity, contravening Section 73 of the Code. 8.4 They further contend the Appellant previously contemplated redundancy, suggesting cost-cutting disguised as restructuring. This, they argue, breached Section 55( 1 )( c), which prohibits unilateral variation of terms without consent. 8.5 Citing Abernethy v Mott26 and Decision Survey v Dlamini,2 7 the Respondents urge courts to assess the real motive behind termination. They distinguish ZESCO Limited J14 v Lungu4 noting that restructuring there was bona.fide and , uncontested. 8.6 They also argue that no proper consultation occurred, violating the standard in SACTWU v Discreto28 On . remedies, they rely on ZANACO v Mweemba29 and GDC Logistics v Sitali3° to affirm the Industrial Court's power under Section 85(5) to grant equitable relief. 8. 7 They submit the Appellant failed to justify the terminations and pray that the judgment be upheld. Respondents' Arguments Ground three (Including Cross Appeal Arguments) 8.8 The Respondents support the trial court's finding that their termination was unlawful and unfair but contend the award of five months' salary was inadequate. They argue that the Appellant's unilateral shift from permanent to fixed-term contracts, without consent or consultation, breached Section 55(1)(c) of the Employment Code Act, which prohibits variation of basic terms without employee agreement. 8.9 They submit that the termination followed a change in shareholding, after which they were offered materially inferior contracts, 90 days for the 1st Respondent and three years (with probation) for the 2nd These offers removed the security . of permanent employment and constituted constructive J15 redundancy. The Respondents experienced financial uncertainty and emotional distress as a result. 8.10 On quantum, they argue that the award did not reflect the seriousness of the breach or prevailing economic hardship. Citing African Banking Corporation v Muntete,31 Barclays Bank v Luwi & Ngulube,32 and Swarp Spinning Mills v Chileshe33 they submit that enhanced damages are warranted where terminations are traumatic or cause significant loss. 8. 11 They further assert that the trial court failed to consider the economic effects of the COVID-19 pandemic. In Dennis Chansa v Barclays Bank34 the Supreme Court endorsed a , progressive approach to compensation in light of economic realities. 8.12 The Respondents also argue that the Appellant's actions, terminating permanent contracts despite redundancy discussions, amounted to bad faith and a deliberate attempt to evade statutory obligations, justifying exemplary damages. They cite Halsbury's Laws of England (4th Ed., Vol. 16( lB), para 686), which provides that compensation should reflect actual loss and be just and equitable. 8.13 On costs, they rely on Y.B. & F. Transport Ltd v Supersonic Motors Ltd35 and Muta le v ZCCM, 36 submitting that costs should follow the event unless exceptional circumstances exist. J16 8.14 In conclusion, they pray that the cross-appeal be allowed, the award of damages enhanced, the main appeal dismissed with costs, and that substantial justice be granted in line with employee protections under the Employment Code. 9.0 APPELLANT'S ARGUMENTS IN REPLY TO GROUND ONE 9.1 The Appellant submits that the Respondents' terminations were lawful and fair, carried out under Section 52(2) of the Employment Code Act No. 3 of 2019, and based on genuine operational requirements. Contrary to the Respondents' claims, the Appellant maintains that the terminations were neither arbitrary nor unlawful. 9.2 It is argued that the Employment Code requires a valid and substantiated reason for termination, which may include operational needs. Citing Sarah Aliza Vekhnik v Casa Dei Bambini Montessori Zambia Ltd11 the Appellant asserts , that it met this requirement by clearly outlining in both the notices and affidavits that the restructuring was necessary to improve operational efficiency. 9.3 The Appellant further submits that the internal restructuring, prompted by a change in shareholding, aimed to enhance performance and business viability, qualifying as a legitimate operational requirement. It relies on Miller v Minister of Pensions37 to affirm that the civil standard of proof has been met. J17 9.4 Responding to cases cited by the Respondents, such as Norris v Brown and Boot24 and Eric Van Der Velde v Business & Design Software (Pty) Ltd,25 the Appellant argues these are grounded in foreign statutes, such as the UK's TUPE Regulations and South Africa's Labour Relations Act, which do not apply in Zambia. Additionally, those cases involved transfers of employment, which did not occur here, making them irrelevant under Sections 28 and 29 of the Employment Code. 9.5 The Appellant emphasizes the employer's prerogative to restructure under Section 52(5) of the Code, citing National Union of Metal Metalworkers of South Africa and Another vAveng Trident Steel/A Division of Aveng Africa Proprietary Limited) and Others, 38 FA WU Obo Kapesi & Others v Premier Foods Ltd t/a Ribbon Salts River39 which affirm that even profitable businesses may restructure for valid operational reasons if done in good faith. It denies that the restructuring amounted to redundancy or was a scheme to avoid redundancy payments. The offer of new contracts was part of a bona fide reorganization, supported by unchallenged evidence on record. 9.6 Finally, the Appellant invokes Lesney Products Ltd v Nolan6 and First National Maintenance Corp. v NLRB,4 0 arguing that judicial interference should not undermine managerial autonomy, especially where restructuring is undertaken for efficiency and sustainability. J18 9.7 The Appellant therefore prays that the appeal be allowed, the finding of unlawful dismissal overturned, and all reliefs granted to the Respondents set aside. 10.0 APPELLANT'S ARGUMENTS IN REPLY TO GROUND TWO 10.1 On the second ground of appeal, the Appellant challenges the trial judge's finding of unfair dismissal, arguing that the Respondents neither pleaded such a claim nor presented supporting evidence at trial. It is submitted that the Notice of Complaint made no reference to unlawful or unfair dismissal, and that raising the issue for the first time in paragraph E25 of the Respondents' final submissions was procedurally improper. 10.2 The Appellant emphasizes that parties are bound by their pleadings and must not ambush each other with new claims at the submission stage. In Peter Allan Mbewe v Workers Compensation Fund Control Board & The Attorney General,4 1 the Supreme Court affirmed the right of each party to procedural fairness and held that trial courts must confine themselves to issues pleaded. 10.3 The Appellant distinguishes Zambia National Commercial Bank v Jason Mweemba,29 cited by the Respondents, noting that in that case, the claim had been properly introduced in the defence and was therefore part of the live issues at trial, unlike in the present case. J19 10.4 To clarify the nature of the terminations, the Appellant cites Redrilza Limited v Abuid Nkazi15 where the Supreme , Court drew a distinction between dismissal, typically arising from disciplinary proceedings, and termination, which may lawfully occur under contractual or statutory provisions without disciplinary cause. The Appellant submits that the Respondents were terminated lawfully in accordance with their contracts and Section 52 of the Employment Code Act. 10. 5 Further reliance is placed on Care International Zambia Ltd v Misheck,42 which affirmed that unfair dismissal must involve breach of statutory rights or discrimination. The Appellant argues that under Section 108(1) of the Industrial and Labour Relations Court Act and Sections 5(2)(a) and 52(4) of the Employment Code, a valid claim for unfair dismissal requires evidence of either discrimination or lack of a valid reason, neither of which was proven. 10.6 Addressing the Respondents' reliance on Section SS(l)(c) of the Employment Code, the Appellant refers to the trial judge's own findings at page 20 of the record, which held that lawful termination of a permanent contract is distinct from unlawful variation of employment terms and does not constitute redundancy when properly executed. 10.7 The Appellant further contends that, in the absence of a cross-appeal against that specific finding, the Respondents J20 are estopped from raising redundancy or variation-based claims at this stage. 10.8 In light of the foregoing, the Appellant submits that the trial judge erred in awarding damages for unfair dismissal in the absence of a pleaded issue or evidentiary basis, and prays that the award be set aside. 11.0 APPELLANT'S ARGUMENTS IN OPPOSITION TO CROSS APPEAL 11.1 In response to the Cross-Appeal, the Appellant opposes the Respondents' claim for enhanced damages, arguing that there is neither legal nor factual basis for any award beyond the one-month contractual notice. The Appellant maintains that the terminations were lawful and not unfair, thus no damages are due. Alternatively, if any are awarded, they should be limited strictly to the notice period. 11.2 The Appellant submits that the Respondents' claims for mental anguish, distress, and inconvenience amount to special damages, which must be specifically pleaded and strictly proven. Relying on Attorney General v D.G. Mpundu4 and Hayward v Pullinger & Partners Ltd , 44 the Appellant contends that the Respondents neither pleaded such damages nor adduced evidence to support them. 11.3 The Appellant further cites Chilanga Cement Plc v Kasote Singoga2 where the Supreme Court held that damages for mental distress in employment matters are reserved for J21 exceptional cases and must be substantiated. Similarly, in Continental Restaurant and Casino Ltd v Arida Chulu45 the Court emphasized that without medical or expert evidence, no award for psychological harm may be granted. In this case, no such evidence was produced. 11.4 Additionally, the Appellant argues that the Respondents' testimonies merely expressed "shock" and being "taken aback," which fall short of establishing mental distress. As members of management, the Respondents were aware of the restructuring and even participated in related discussions. They declined alternative employment offers, which, the Appellant submits, breaks the causal link to any alleged consequential loss. 11.5 On the issue of judicial notice, the Appellant contends that prevailing economic hardship is not a notorious fact that can be judicially noticed without evidence. Citing Gastove Kapata v The People46 and Shamwana v The People 47 the Appellant stresses that only clearly established and notorious facts may be judicially noticed, macroeconomic effects on employment are not among them and require proof. 11.6 The Appellant distinguishes Barclays Bank Zambia Plc v Weston Luwi & Suzyo Ngulube3 noting that the award of enhanced damages in that case was based on malicious conduct and unjustified disciplinary proceedings, which are absent here. The Appellant acted within contractual bounds and made good-faith offers of alternative employment. J22 11. 7 Regarding costs, the Appellant argues that under Rule 44 of the Industrial and Labour Relations Court Rules, costs in labour matters are awarded only where a party has acted unreasonably, vexatiously, or improperly. Citing Zambia National Commercial Bank Plc v Joseph Kangwa,4 8 the Appellant submits that no such conduct has been demonstrated on its part. 11.8 In conclusion, the Appellant prays that the Cross-Appeal be dismissed for lack of merit, the award of damages beyond the notice period reversed, and reiterates that claims for special damages must be specifically pleaded and proven, particularly in employment cases involving non-pecuniary loss. 12.0 RESPONDENTS REPLY FOR THE CROSS APPEAL 12.1 In reply, the Respondents submit that the trial court was justified in awarding damages beyond the contractual notice period, as the termination of their permanent contracts was abrupt, unlawful, and inflicted in a manner that caused economic hardship, loss of job security, and undue distress. 12.2 They argue that the Appellant's reliance on operational requirements following a change in ownership was merely a pretext to remove permanent employees. This is evidenced by the Appellant's own witness, who admitted that the new owners "did not want permanent employees" (Record of J23 Appeal, p. 205). The Respondents submit that this amounts to both procedural and substantive unfairness. 12.3 Relying on Barclays Bank Zambia Plc v Weston Luwi & Suzyo Ngulube,3 they argue that enhanced damages may be awarded where justice demands, such as where termination is traumatic or impacts future employability. Similar principles were applied in Chilanga Cement v Kasote Singogo2 and Joseph Chitomfwa v Ndola Lime Ltd49 where courts awarded enhanced compensation for distress and loss arising from sudden terminations. 12.4 The Respondents clarify that they are not claiming special damages for mental distress, but that the trial court correctly considered the evidence of hardship and unchallenged testimony on the emotional impact of the terminations. The 1st Respondent testified to his shock at receiving a short term contract while others received longer offers, and the 2nd Respondent expressed dismay at being placed on probation for a position he had long held. 12. 5 They invoke the broad remedial powers under Section 85( 5) of the Industrial and Labour Relations Court Act and Rule 55 of the Industrial Relations Court Rules, which permit the court to do substantial justice notwithstanding procedural defects. Cases such as Barclays Bank Zambia Ltd v Mando Chola & Ignatius Mubanga50 and GDC Logistics Zambia Ltd v Kanyata & Others, 30 affirm that J24 uncontroverted evidence may support relief even where pleadings are incomplete. 12.6 On the issue of economic hardship, the Respondents submit that the trial court was entitled to take judicial notice of the effects of the COVID-19 pandemic. They refer to Statutory Instrument No. 48 of 2020, which exempted certain staff from severance entitlements, as evidence of the national employment crisis. They argue that these conditions were notorious and required no further proof, consistent with judicial notice principles. 12. 7 Regarding costs, the Respondents assert that Order 12 Rule 1 of the Court of Appeal Rules gives the Court broad discretion to award costs as justice requires. They maintain that, given the circumstances and the Appellant's conduct, costs should be awarded in their favour. 12.8 In conclusion, the Respondents pray that the Cross-Appeal be upheld, the damages enhanced to reflect the hardship suffered, and the Appellant condemned in costs. 13.0 HEARING OF THE APPEAL 13.1 At the hearing of the appeal, counsel for the Appellant submitted that the heads of argument dated 9th May 2023, which had been duly filed on 18th April 2023, would be relied upon in their entirety, save for brief oral submissions. The principal issues raised in the appeal were twofold: firstly, the employer's right to restructure its business operations to J25 •. promote productivity and efficiency; and secondly, the proper measure of damages in employment-related terminations. Counsel submitted that under Zambian law, contracts of employment are terminable provided the procedure prescribed by law and the contract is followed. 13.2 It was argued that the record of appeal demonstrated a genuine restructuring exercise fallowing a change in shareholding, and that the termination of the respondents' contracts was a product of that bona fide organisational restructuring. When queried by the Court as to whether additional steps had been taken to meet a threshold of valid justification, counsel responded that the issue of valid reasons had not been raised in the court below, and thus the Appellant was under no obligation at the time to lead further evidence. He asserted that the burden of justification only arose from the lower court's reasoning. In conclusion, Mr. Chomba pointed out that the respondents were terminated for operational reasons, as clearly stated in the notice of termination. 13.3 With respect to damages, Mr. Chomba contended that only the standard measure, namely, one month's pay in lieu of notice, should be awarded. He submitted that the respondents had failed to mitigate their losses by rejecting alternative employment contracts that had been offered. 13.4 In response, Ms. Banda referred the Court to page 144 of the record of appeal, which she argued explained the concept of J26 "operational requirements." She also cited guidance from the International Labour Organisation (ILO) conventions to provide additional clarity. 13.5 Further, Ms. Kaluba Mwansa submitted that at the time the appeal was commenced, there was limited domestic jurisprudence on the meaning of termination for operational requirements. However, she drew the Court's attention to the recent decision in Pius Chilufya Kasolo v ZCCM, Appeal,51 in which the Court of Appeal held that an employer must provide justification for invoking operational requirements. She argued that the Appellant failed to do so, especially in the case of the 1st respondent, whose permanent contract was terminated and replaced by a three-month contract. Counsel contended that this did not demonstrate any genuine enhancement of operational efficiency. 13.6 On the issue of damages, counsel relied on Citibank Zambia Ltd v Suhayl Dudia,52 and submitted that the respondents, being in managerial positions, faced diminished employment prospects and significant inconvenience, justifying an award of enhanced damages. 13.7 In reply, Ms. Makwemba cited the case of ZESCO v Patricia Kabwe Lungu,4 to argue that where termination is effected in accordance with the employment contract, a claim for enhanced damages cannot be sustained. She contended that the respondents' positions in management did not, in themselves, warrant an elevated measure of compensation. J27 14.0 ANALYSIS AND FINDINGS 14. l We have meticulously considered the grounds of appeal, the record of appeal, and the arguments advanced by the parties. We propose to deal with the grounds of appeal as they have been set out. 1. Validity of Operational Requirements as a Ground for Termination 14.2 The principal issue for determination under grounds one and two is whether the termination of the Respondents' employment on the basis of operational requirements was lawful and justified within the ambit of Section 52(2) of the Employment Code Act. Section 52(2) provides that: "A contract of employment shall not be terminated unless there is a valid reason for the termination connected with the capacity or conduct of the employee or based on the operational requirements of the undertaking." 14.3 The interpretation of Section 52(2) of the Act was authoritatively set out in our decision in Sarah Aliza Vehknik v. Casa Dei Bambini11 where we unequivocally , held that an employer may not lawfully terminate an employee's services without providing reasons for the termination, and ensuring that such reasons are properly substantiated. 14.4 In the matter before us, the Appellant relied on a change in shareholding and a policy shift to phase out permanent J28 contracts in favour of fixed-term engagements. Letters were issued to the Respondents terminating their existing contracts and offering them new terms, which they declined. The Appellant submits that this conduct constituted procedural compliance and that the restructuring was done uniformly and in good faith. 14.5 However, the Respondents have raised significant and weighty concerns. They argue that the change 1n shareholding, standing alone, is not in itself a sufficient operational justification. They assert that there was no meaningful consultation, no disclosure of objective business difficulties, and that the true intent was to strip them of the protections associated with permanent employment, thereby contravening section 55(1)(c) of the Act. They further point to the lack of gratuity and other altered terms in the new contracts as evidence of a substantive variation of core conditions, amounting to constructive redundancy. 14.6 In determining whether the termination of employment on grounds of operational requirements meets the legal threshold of fairness and lawfulness, the courts have consistently underscored the obligation upon an employer to provide not merely a stated reason, but one that is valid, genuine, and substantiated by evidence. 14.7 In the case of Sarah Aliza Vekhnik v Casa Dei Bambini Montessori Zambia Ltd,11 we reaffirmed the principle that an employer is required to give reasons for termination, and J29 more importantly, that the reasons given must be substantiated. A mere assertion that termination was for operational purposes, without evidence, is insufficient. 14.8 In another instructive case of Pius Chilufya Kasolo v ZCCM Investment Holdings51 where we were called upon to examine whether the reason advanced for termination was genuinely based on operational requirements, we stated the f oliowing at paragraph 11. 28 on page J36: "The respondent did not lay any evidence before court to justify and substantiate the termination based on operational requirements. We agree with the Appellant that it could never have been the intention of the legislature to have a situation where an employer can terminate its employees contract, using any concocted reasons without any justification whatsoever, as that would result in abuse, and defeat the whole purpose of the Act, which is to protect the employee, or provide him with security." 14. 9 We ultimately held that the reason advanced for the termination was neither valid nor justifiable, as the Respondent failed to present any evidence demonstrating that the dismissal was based on a legitimate commercial ground, such as financial incapacity to retain the Appellant or a restructuring exercise. 14.10 The Supreme Court in Zambia Telecommunications Company Ltd v Mirriam Shabwanga, 23 emphasized that J30 unfair dismissal considers both the merit and substance of the employer's justification. The court observed that employers must act on specified and reasonable grounds that can withstand scrutiny under statutory protections aimed at promoting fair labour practices. 14.11 Comparatively, in Abernethy v Mott, Hay & Anderson,26 the English Court held that an employer's stated reason for dismissal, while constituting evidence, is not conclusive of the real reason. The real reason must be a set of facts known to or genuinely believed by the employer and must be supported by evidence. If the stated reason 1s unsubstantiated or falsely advanced, the dismissal is liable to be declared unfair. 14.12 The South African Labour Court in Eric Van Der Velde v Business & Design Software (Pty) Ltd25 also pronounced that a reason related to operational requirements must stand up to scrutiny. In that case, the employer's reliance on operational requirements was rejected as lacking credibility, with the court holding that where the dismissal is connected to a change of ownership or transfer of business without more, such a reason may amount to an automatically unfair dismissal. They stated as follows: «The reason for dismissal proffered by the respondents (one related to operational requirements) fails to stand up to scrutiny. .. The onus lies on the employer to show that J31 the dismissal was not related to the transfer but due to genuine operational grounds." 14 .13 Furthermore, in Decision Survey International (Pty) Ltd v Dlamini27 the South African Labour Appeal Court ruled that where an employer resorts to retrenchment when reasonable alternatives exist, the court will closely interrogate whether the stated reason was genuine or a mere sham. The court underscored that operational justification must be real, not superficial, and must be evaluated in the context of available options and procedural fairness. 14.14 These authorities make it abundantly clear that an employer's reliance on operational requirements as a basis for termination must not be a superficial justification or a convenient label. It must be supported by concrete, demonstrable facts, and accompanied by fair process. Failure to do so renders the termination unfair and in breach of statutory safeguards. 14.15 Persuasive foreign authorities support the need for employers to do more than state a reason. In Lesney Products & Co. Ltd v Nolan6 it was held that redundancy or restructuring , must be backed by demonstrable business necessity. Likewise, in FA WU v Premier Foods, 39 the Labour Court held that dismissals for operational reasons require both procedural transparency and genuine commercial rationale. These principles, while not binding, reinforce the J32 interpretation of section 52(2) as demanding both fair process and evidentiary substance. 14. 16 Against this backdrop, we are constrained to find that although the Appellant cited operational requirements and offered new contracts, it did not discharge its full burden under section 52(5). There is no evidence on record of specific operational constraints, financial reports, or internal analysis that made the restructuring necessary. The letters issued, while procedurally compliant in form, lacked substantive backing in content. 14.17 In our considered view, the mere issuance of a letter citing operational requirements, absent supporting evidence and meaningful employee engagement, does not meet the dual threshold of procedural and substantive compliance. The restructuring may have been strategic, but the law demands that such business decisions be carried out transparently, consultatively, and with a demonstrated need. Distinguishing ZESCO v Patricia Kabwe Lungu from the Present Case: 14 .18 We find it necessary to examine the decision of the Supreme Court that addressed the issue of restructuring on the basis of operational requirements. The case of ZESCO Limited v Patricia Kabwe Lungu4 is distinguishable from the present matter both in factual context and legal application. In the ZESCO case (supra), the Court upheld the employer's right to . J33 - ' restructure and reorganize its operations, holding that termination of employment resulting from such a bona fide restructuring process did not constitute unlawful dismissal. Notably, in that case, the employee did not dispute the legitimacy or commercial rationale behind the reorganization, and there was evidence of a structured process undertaken to achieve operational efficiency. 14.19 In contrast, the facts of the present case reveal that the Appellant's termination of the Respondents' contracts was not supported by a demonstrable or substantiated operational requirement. The Appellant merely cited a change in shareholding and a shift in company direction as reasons for termination, without evidencing how such changes translated into operational inefficiencies warranting termination. Moreover, there was no meaningful consultation, assessment of alternatives, or evaluation of employee performance prior to the terminations. 14.20 Unlike in the ZESC04 case, where the restructuring process was transparent and evidently linked to commercial goals, the purported restructuring in the present case appears to have been a pretext to phase out permanent contracts and replace them with short-term contracts, an approach that lacks the hallmarks of a bona fide operational adjustment. Accordingly, the Appellant's actions in this case fall short of the legal threshold established in ZESCO vs Patricia Kabwe Lungu4 and other authorities for justifiable termination based on operational requirements. J34 .. 14.21 The myriad of cases that we have highlighted emphasize that mere invocation of operational needs does not suffice; courts will interrogate genuineness and necessity. 14.22 These cases collectively affirm that for a termination to be lawful on account of operational requirements, the employer must: 1. Provide a valid, commercially justifiable reason. 2. Substantiate that reason with evidence. 3. Demonstrate that the decision was not a pretext or capricious; and 4. Where applicable, show that the termination followed a fair process, including consultation. 14.23 Accordingly, we are inclined to affirm the trial court's conclusion that the termination did not meet the statutory test under section 52(2). In light of the foregoing we find ground one and two to be devoid of merit and dismiss them. 15.0 GROUND THREE AND CROSS APPEAL 15.1 The Appellant argues that the trial court erred in awarding the Respondents five months' salary each for "unfair and unlawful dismissal," as neither the pleadings nor evidence supported such a finding. It maintains that the case involved termination, not dismissal, and that damages should have been limited to the contractual notice period absent any proof of hardship or exceptional circumstances. The Appellant adds that the Respondents declined offers of re-employment, J35 thereby failing to mitigate their loss. It therefore seeks to have the award set aside and replaced with one consistent with the notice period. 15.2 The Respondents support the finding of unlawful and unfair termination but argue that the award of five months' salary was inadequate given the breach of statutory protections and the shift to inferior fixed-term contracts without consent. They submit that the termination caused financial hardship and emotional distress, exacerbated by the economic impact of COVID-19, and that the Appellant acted in bad faith to avoid redundancy obligations. They pray that the cross appeal be allowed, the damages enhanced, and the main appeal dismissed with costs to ensure just and equitable relief. 15.3 Ground three and the cross-appeal both concern the award of damages and will therefore be considered together. 15.4 The learned trial Judge awarded five months' salary as damages. The settled legal position, as established in Daka and Another v ZCCM (supra), is that damages for termination of employment are ordinarily limited to the contractual notice period unless exceptional hardship or psychological trauma is proven. Upon reviewing the authorities and the facts, we find that the termination of the Respondents was both unlawful and unfair, not being grounded in bona fide operational requirements. The purported restructuring exercise, cited as justification for . J36 .. converting permanent contracts into fixed-term contracts following a change of ownership, was not substantiated by any credible evidence. We therefore conclude that the restructuring fell outside the lawful scope of operational requirements under the Employment Code Act, entitling the Respondents to an award of damages. 15.5 We further hold that the award of five (5) months' salary by the lower Court was made judiciously, and the criticism directed against it is without merit. We say so because the Supreme Court has consistently affirmed that the general rule of limiting damages to the period of notice is not absolute. There exist well-established exceptions that justify a departure from the strict application of that rule, and these exceptions, as discussed in paragraph 15.4, fully support the approach adopted by the lower Court. In Barclays Bank Zambia Plc v. Luwi & Ngulube (supra), the Apex Court articulated its position in the following terms: "At common law, the measure of damages for wrongful termination of the contract of employment is determined by the period of notice. The award is equivalent to the salary for the period of notice. However there are exceptions. The case of Swarp Spinning Mills Limited v Sebastian Chileshe and Others which Mr Lukangaba cited, clearly sets out what some of the exceptions to the nonnal measure of damages are. At this stage, we take the liberty to correct Mr. Lukangaba 's J37 assertion that mental anguish is the only exception. What we said in that case is that the normal measure of damages is departed from where "the circumstances and iustice of the case so demand". Therefore, termination inflicted in a traumatic fashion, causing undue distress, is but one example. Loss of opportunities is another." (Emphasis ours) 15.6 We extensively addressed the circumstances under which a court may depart from the normal measure of damages in Lumwana Mining v. Henry Nyambe & Others53. In that case, where the breach involved a statutory provision, we held that the respondents were entitled to damages extending beyond the contractual notice period. (see also the esteemed authors of Winnie Sithole Mwenda and Chanda Chungu in their book titled A Comprehensive Guide to Employment Law in Zambia: Second Edition at page 592) 15.7 Applying the same principle to the present matter, and in view of our finding that there was a breach of statutory provisions, we are satisfied that the Respondents are equally entitled to an award of damages beyond the notice period. That, in our considered judgment, is what the justice of this case demands. In saying so, we are mindful that while the Appellant's conduct amounted to a breach of statutory protections, there is no evidence on record of mala fides or deliberate ill-will in the manner the restructuring was undertaken. The breach, though established, appears to have stemmed from a misapprehension of the statutory requirements rather than a calculated effort to evade them. J38 This factor tempers the gravity of the breach but does not, in law, absolve the Appellant from liability to compensate beyond the contractual notice. We therefore uphold the award of five (5) months' salary. 15.8 With respect to the Respondents' further prayer for enhanced damages beyond the five months awarded, premised on alleged economic hardship or professional disruption, we are of the considered view that the award of five months sufficiently meets the justice of the case. We accordingly decline the invitation to enhance the award beyond what has already been granted. 15.9 Moreover, the Respondents failed to provide compelling evidence of emotional distress or psychological harm. As reaffirmed in Chilanga Cement Plc v Kasote Singoga2, enhanced damages must be supported by clear proof of exceptional hardship, which is lacking in this case. 15.7 Accordingly, the cross-appeal is hereby dismissed 1n its entirety. The award of five (5) months' salary is affirmed, and no basis has been established to warrant any further compensation. 16.0 CONCLUSION 16.1 The substance of our judgment is reflected in the following terms: 1. The Appellant failed to prove that the termination of the Respondents' contracts was grounded in bona fide J39 operational requirements as required under section 52(2) of the Employment Code Act. 2. The evidence clearly demonstrated that the terminations were occasioned by a change in shareholding, which does not amount to a valid or lawful commercial reason for termination. 3. The Appellant did not substantiate how the purported restructuring would enhance operational efficiency, nor did it adhere to principles of procedural fairness or consultative engagement. 4. The trial court correctly found that the termination was both unlawful and unfair, and acted within its jurisdiction in awarding five months' salary as damages. 5. Cross appeal for enhanced damages dismissed for want of merit. 17.0 COSTS 17.1 Costs are awarded to the Respondents, in line with the general principle that costs follow the event. -- (__ ::::, M.M. Kondolo, SC COURT OF APPEAL JUDGE B.M. ajula K. Muzenga COURT OF APPEAL JUDGE COURT OF APPEAL JUDGE