(555)
IN THE SUPREME COURT OF ZAMBIA
HOLDEN AT NDOLA
SCZ JUDGMENT NO. 23 OF 2014
APPEAL NO. 57/2012
(Civil Jurisdiction)
BETWEEN:
JACKSON MWAPE AND 61 OTHERS
APPELLANTS
AND
ZCCM INVESTMENTS HOLDINGS LIMITED PLC
RESPONDENT
CORAM: CHIBOMBA, MUSONDA, JJS and KAOMA Ag JS
On 5th of March, 2013 and 30th May, 2014
For the Appellants:
Mr. T.M. Chabu - Ellis & Company.
For the Respondent: Mr. J. Kaite - J. Kaite Legal Practitioners.
JUDGMENT
Kaoma, Ag JS delivered the Judgment of the Court.
Cases referred to:
1. Sam Amos Mumba v Zambia Fisheries and Fish Marketing
Corporation (1980) Z.R. 135
2. Walton Harvey Ltd. v Walker and Homfrays Ltd. (1931) 1 Ch 274
3. Bank Line Ltd. v Arthur Capel & Co. (1919) AC 435
4. Maritime National Fish v Ocean Trawlers (1935) AC 524
5. Zambia Oxygen Limited and another v Paul Chisakula and others
(2000) Z.R. 27
6. BP Exploration Co (Libya) Limited v Hunt (1982) 1 ALL ER 925
7. Jacob Nyoni v Attorney General (2001) Z.R. 65
8. Standard Chartered Bank Plc v Willard Solomon Nthanga and
Others (2008) 1 Z.R. 127
J2
(556)
9. Salomon v Salomon & Co. (1897) AC 22 (HL)
10. Davies Contractors Ltd. v Farcham U.D.C (1956) AC 696
11. British Movietonews Ltd v London and District Cinemas [1952] A.C.
166.
12. Fribrosa Spolka Akcyjna v Hairbairn Lawson Combe Barbour Ltd.
(1943) A.C. 32.
13. Zambia Consolidated Copper mines Ltd v Kangwa and others (2000)
Z.R.109
14. Mususu Kalenga and another v Richman’s Money lenders
Enterprises (1999) Z.R. 27
Statutes and other works referred to:
1. The Privatisation Act, Chapter 386
2. The Law Reform (Frustrated Contracts) Act, Chapter 73
3. Gower and Davies: Principles of Modern Company Law, 8th Edition,
2008, Sweet and Maxwell, London
4. Chitty on Contracts, Vol. 1, 29th Edition, 2004, Sweet and Maxwell,
London
5. Chitty on Contracts, Vol. 1, 30th Edition, 2008, Sweet and Maxwell,
London
6. Halsbury’s Laws of England, 4th Edition (Reissue), Vol. 9(1)
When we heard this appeal, we sat with Honourable Dr. Justice
Musonda. He has since resigned. This is, therefore, a judgment by
the majority.
This is an appeal against the High Court judgment in which the
court found that the agreement between the appellants and the
respondent, for provision of health services to the appellants, after
separation from employment was frustrated by Government’s
decision to privatise hospitals and clinics previously owned and
operated by the respondent; and that the claim that the
respondent must pay cash in lieu of provision of health facilities
J3
(557)
was asking the respondent for something not agreed upon or
contemplated at the time of the employment of the appellants.
The main facts which were not in dispute are that the
appellants were on diverse dates employed by ZCCM Limited, the
respondent’s predecessor. Later, they were on varied dates, but
between 1998 and 1999, separated from employment; some on
medical grounds, others on grounds of redundancy, and others on
normal retirement. It was a condition of service that employees
who were discharged on medical grounds were to access the ZCCM
hospitals and clinics for life as long as the illness was job related;
those declared redundant were to access the medical facilities for
one year; and those on normal retirement for five years.
Following the privatisation of ZCCM Limited and the
hospitals and clinics by the Government on 1st April, 2000, the
appellants lost access to the hospitals. The new owners put in
place new regulations of access and the respondent had no control
and/or hand in the running of the health facilities.
On 7th December, 2006, the appellants commenced an action
by writ of summons against the respondent seeking damages as a
J4
(558)
result of failure by the respondent to provide medical services,
payment of monies as damages in lieu of the provision of medical
services, damages for mental anguish, and interest and costs.
They pleaded in the statement of claim that they suffered
trauma and pain when they tried to attend upon the former
hospitals of the respondent which had been privatised and were
not allowed access in breach of the term in their contracts; and
that the respondent did not provide monies or subsidies in lieu of
medical facilities. In its defence, the respondent denied any breach
and averred that the condition of service with regard to access to
medical facilities was frustrated by the Government decision to sell
the hospitals through privatisation.
Three witnesses testified for the appellants. Jackson Mwape
(PW1) who represented other appellants who were medically
discharged, testified that he was employed by the respondent on
29th June, 1976. He was discharged on 23rd September, 1999 on
medical grounds. He became ill due to the nature of his job. After
discharge, he tried to seek treatment from the company hospital,
but was sent back. That happened to the other appellants. He said
J5
(559)
by refusing them access to treatment, ZCCM breached the terms
of their employment, and that if there was a change of policy
before their discharge, it was not brought to their attention. He
wanted ZCCM to compensate them or pay damages in lieu of the
lost entitlements, and damages for contracting illness on duty.
He said he needed compensation as he sought treatment in
other hospitals whenever he was ill when he should have been
treated in the company hospital, and ZCCM deducted between
K150.00 and K200.00 per month from his salary for treatment. He
admitted that he had no documentary proof to show that he was
denied access to the hospitals or that the deductions were made.
Edwin Mwami (PW2) testified that he was employed by the
respondent in 1965. He served for 33 year before normal
retirement on 19th March, 1998. He was advised that he would
access treatment for 5 years. He went to the hospitals, but was
told that they had been sold. He wanted money in lieu of service
for the 5 years. He said deductions of K150.00 or K200.00 were
made for medical fees, but that there was no documentary proof.
J6
(560)
Chomola Kafumbu (PW3) testified that he was employed by
ZCCM in 1982. He served for 171/2 years before he was declared
redundant. He was entitled to access treatment at ZCCM hospitals
for 1 year. He tried to attend the hospitals twice, but was turned
away. He deemed that a breach of contract, so he wanted cash in
lieu of lost medical services. He agreed that for some of the
appellants declared redundant, the 1 year period within which to
attend the hospitals lapsed before privatisation.
Richard Nduna Chilembo (DW1) confirmed that it was a
condition of service that employees who were separated by
retirement, redundancy or medical discharge were to access ZCCM
hospitals. He testified that all the people who left were accorded
the facility until 1st April, 2000 when the hospitals were privatised
by the Government through an Act of Parliament. As a result, the
employees lost access to the hospitals. The privatisation was not a
ZCCM programme, but those who needed treatment after 1st April,
2000 attended Government or private hospitals and ZCCM met the
costs of such treatment. He was not aware that any of the
appellants were denied access to Government hospitals or
presented receipts for treatment at a private hospital and ZCCM
J7
(561)
refused to pay. No one was refused treatment before privatisation
so long they presented letters of separation. There was no evidence
that any of the appellants fell sick and was refused access to
medical facilities. In cross examination, he said after privatisation
they discussed the issue with the Union which was informed that
ZCCM would no longer provide medical services to former
employees and that upon the sale of the hospitals, the right fell off.
In his judgment, the learned trial Judge found as undisputed
that the appellants were employees of the respondent; that they
were separated from employment either by normal retirement in
which case they were entitled to have post-employment access to
hospitals and clinics of the respondent for five years; on medical
grounds in which case, they were entitled to access the hospitals
and clinics for life if the illness was job related; and declared
redundant in which case, they were entitled to access the
hospitals and clinics for one year. He also found that both parties
were agreed that after the hospitals and clinics were privatised by
the Government, the majority shareholder in the respondent, the
appellants had no access to the health facilities as the new owners
J8
(562)
put in place new regulations of access and the respondent had no
control or hand in the running of the facilities.
The learned Judge set out two issues for decision: (a) whether
the privatisation of the hospitals and clinics of the respondent by
the Government was or was not a frustrating factor of the
contracts on post-employment treatment of the appellants in the
hospitals and clinics, until then, owned by the respondent; and (b)
whether the appellants were entitled to damages as a result of
failure by the respondent to provide them with medical services, or
payment of money as damages in lieu of medical services and/or
damages for mental anguish or any other relief.
Regarding the first issue, the learned Judge observed that the
respondent was a parastatal company in which the Government
was a majority shareholder; and that the decision to privatise the
hospitals and clinics was made by the Government and not the
respondent which had no choice in the matter or control over the
decision of the Government to privatise the hospitals and clinics.
Further, whilst he accepted the existence of the postemployment condition of service for provision of medical services
J9
(563)
to the appellants depending on the mode of separation, he noted
that the respondent could not provide the services as they no
longer had authority to operate the health facilities privatised by
Government, thus making it impossible for them to honour the
contracts with the appellants, and so could not be held liable. He
found like in Sam Amos Mumba v Zambia Fisheries and Fish
Marketing Corporation Ltd1 that the decision by the Government to
privatise the health facilities was a frustrating factor.
As to the second issue, the learned Judge observed that the
post-employment condition of service agreed upon by the parties
was that of provision of treatment/health facilities for specified
periods. He found no clause in the conditions of service that
provided for payment of cash in lieu of access to health facilities.
In his view, the claim for payment of cash in lieu of provision
of health facilities was asking the respondent for something that
was not agreed upon or contemplated at the time of employment of
the appellants. According to him, the post-employment provision
of health facilities was based on the belief that the respondents
would continue operating the hospitals and clinics in question.
J10
(564)
Displeased with that judgment, the appellants have appealed
to this Court on the following two grounds:
1. That the learned trial Judge erred in law and in fact when he
held that the agreement between the appellants and the
respondent relating to the provision of health services after
separation was frustrated by the action of the Government
when it privatised the hospitals and clinics previously
operated by the respondent.
2. That the learned trial Judge erred in law and fact when he
held that the appellants’ claim for cash in-lieu of provision of
health facilities was asking the respondent something not
agreed upon or contemplated at the time of employment of the
appellants.
Mr. Chabu, Counsel for the appellants, relied mainly on his
Heads of Argument which he augmented with oral submissions. In
aid of ground 1, he contended that the doctrine of frustration did
not apply because it was self-induced as the respondent had
foreseen the effect of privatisation and the Government, as
majority shareholder, provided against the risk of privatisation.
In support of this argument he cited Walton Harvey Ltd v
Walker Homfrays Ltd2. He submitted that the respondent was well
aware of the Government policy to privatise mines; which policy
was a notorious fact, thus the respondent should have provided
J11
(565)
against its risk by paying the appellants money in lieu of provision
of the health services, which they did not do, so this case fell
within the above cited exception to the doctrine of frustration.
Counsel also argued that the doctrine of frustration does not
apply where it is self-induced as affirmed in Bank Line Ltd. v
Arthur Capel & Co.3 and adopted in Maritime National Fish v Ocean
Trawlers4. He submitted that the Government was a majority
shareholder in the respondent, and made the decision to privatise,
so privatisation was not a frustrating event as it was self-induced
by the Government in its capacity as owners of the respondent.
Additionally, Counsel submitted, that the privatisation of the
health facilities was not a frustrating event as the Government,
being the majority shareholder in the respondent, had provided
against the risk under section 39 (1) and (2) of the Privatisation
Act, Cap 386 (the Act). He cited Zambia Oxygen Limited and
Zambia Privatisation Agency v Paul Chisakula and others5 which
made reference to section 39(1) and (2) of the Act.
He argued that the law expected the proceeds of privatisation to
support provision of health services to former employees of the
J12
(566)
respondent in line with the above case and not to curtail
employees’ conditions of service in the privatised companies.
In support of ground 2, Mr. Chabu contended that the
respondent had a statutory obligation to pay monies in lieu of
provision of health services notwithstanding that they ceased to
have control over the hospitals and clinics by virtue of sections
3(1) and 3(3) of the Law Reform (Frustrated Contracts) Act, Cap 73.
He cited BP Exploration Co (Libya) Ltd v Hunt (No 2)6 in which he
argued, Robert Goff, J., highlighted the principles under the
English Law Reform (Frustrated Contracts) Act, 1943, which Act he
argued, has been re-enacted under our Cap 73.
He argued that for a party to obtain a remedy under section 3(1)
of Cap 73 the contract must be governed by the law of Zambia; it
must become impossible of performance; and the parties must be
discharged from further performance as a result of impossibility of
performance. He argued that the contract herein satisfied the
above in light of the court’s factual findings; and the appellants
provided services to the respondent while in employment which
amounted to a valuable benefit within the meaning of section 3(3).
J13
(567)
He added that upon cessation of employment, the appellants
acquired rights to access medical facilities in hospitals and clinics
owned by the respondent under their contracts of employment, so
monies as damages in lieu of provision of medical services were
payable by virtue of the above Act.
According to him, the said rights were accrued rights which
could not be abrogated in any way. He referred us to our decision
on accrued rights in Jacob Nyoni v Attorney General7 which he
argued, was cited with approval in Standard Chartered Bank
Zambia Plc v Willard Solomon Nthanga and others8. He submitted
that the Privatisation Act did not abrogate the appellant’s
entitlements as it provided that the proceeds of privatisation were
to support redundancies and retrenchments and provision of
health services, inter alia, to former employees of the respondent.
In his oral submissions, Mr. Chabu argued that even if
privatisation was held to be a frustrating event, the appellants
were entitled to the remedies as pleaded on ground that the
respondent had been making monthly deductions for purposes of
health services to be rendered to the appellants after the cessation
J14
(568)
of employment. He invited us to refer to pages 95 to 99 of the
Record of Appeal. He prayed that this appeal be upheld.
Mr. Kaite, Counsel for the respondent, equally relied on his
Heads
of
Argument,
which
he
too
augmented
with
oral
submissions. In response to ground 1, he submitted that the
frustrating event was neither foreseeable nor self-induced. He
referred us to Chitty on Contracts-General Principles (2004) at page
1311 where the learned authors state as follows:
“A contract may be discharged on the ground of
frustration when something occurs after the formation of the
contract which renders it physically or commercially
impossible to fulfil the contract or transforms the obligation to
perform into a radically different obligation from that
undertaken at the moment of entry into the contract.”
In light of the above, he argued, the court below was on firm
ground in its findings that the privatisation of the hospitals and
clinics made the contracts that provided for access to medical
services post-employment incapable of performance and that the
circumstances under which the appellants were asking the
respondent to perform its obligations under the contract would
J15
(569)
render performance something radically different from what was
envisaged by the parties at the inception of the contracts.
Pertaining to the argument by Mr. Chabu that the frustrating
event was foreseeable, so the respondent should have made
provision against it by paying monies in lieu of actual services, Mr.
Kaite submitted that Walton Harvey Ltd. v Walker & Homfrays
Ltd.2 is distinguishable because, in that case, the defendant knew
at the time of contracting with the plaintiff of the risk that the
premises would be compulsorily acquired and demolished by a
local authority acting under its statutory powers, but did not
notify the plaintiff about the risk.
Counsel contended that frustration can only be foreseeable if
it was foreseen at the time of contracting by the party sought to be
held liable or if a reasonable person of ordinary intelligence would
regard as likely to occur (at the time of contracting), the said
frustrating event and omitted to inform the other party to the
contract so that a contingency is made.
He submitted that in this case, the evidence reveals that PWs
1, 2 and 3 were employed in 1976, 1965 and 1982 respectively;
J16
(570)
that at the material times, the privatisation of the respondent was
not something that either party could have foreseen, so it is an
error for the appellants to argue that the frustrating event was
foreseeable at the time of termination of the contracts or
immediately before. He argued that the respondent had no
obligation, contractual or otherwise, to change the terms of the
employment contracts on account of the privatisation process.
He stated that in terms of section 3(1) of Cap 73, the
respondent was discharged from extra performance of the contract
at the time it was divested of its health facilities by Government.
Regarding self-induced frustration, Counsel referred us to
Chitty on Contracts (supra) at page 1343 where it is stated that the
essence of frustration is that it should not be due to the act or
election of the party seeking to rely on it and that a contracting
party cannot rely on self induced frustration. He distinguished
Maritime National Fish v Ocean Trawlers4, on the basis that the
decision to not use the otter trawls on the chartered vessels was
that of the defendant; while in this case, the appellants should
demonstrate that the respondent itself made the decision that
J17
(571)
caused it to become incapable of performing its post contractual
obligations of providing medical facilities to the appellants.
Furthermore, Counsel submitted, the appellants’ argument
that since the Government was a major shareholder in the
respondent, and the decision to privatise the respondent was its
decision, then the respondent should be held liable for the
decision that the Government made, ignores the fact that a
company has a separate legal personality from that of its members
and that the company is not in law the agent for its members.
In support of this argument, he cited Gower and Davies:
Principles of Modern Company Law (2008) at pages 33 and 34 and
the dictum of Lord McNaughton in the celebrated case of Salomon
v Salomon & Co9.
He argued that the respondent and the Government were not
and are not the same person at law, that the decision to privatise
the parastatals was a government decision that was made in its
capacity as such and not as shareholder such that the decision
should be imputed to the respondent, and that decisions that are
capable of being imputed to the respondent are those it makes
J18
(572)
through its board of directors and its members in general meeting;
and that the appellants did not tender evidence to show that the
respondent itself passed a resolution to privatise itself.
He also submitted that in terms of section 39 of the
Privatisation Act, the proceeds of sale of shares and assets in the
privatised companies were paid into the Privatisation Revenue
Account established by the Minister of Finance and held at the
Bank of Zambia; that the Act does not vest any power in the
company that was to be privatised to either sell its own shares or
collect proceeds thereof; that power was vested in the Zambia
Privatisation Agency established under section 3 the Act.
Mr. Kaite also distinguished Zambia Oxygen Ltd. v Chisakula
and others5 where he argued, we took cognisance of the fact that
the payment of proceeds of privatisation was the responsibility of
the Zambia Privatisation Agency and not the company undergoing
privatisation. He argued that the appellants’ argument in terms of
that case and section 39 of the Act is misconceived in so far as it
intended to attach liability to the respondent to pay monies out of
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(573)
the Privatisation Revenue Account to the appellants as the
respondent has no access or authority to deal with the Account.
With regard to ground 2, Counsel contended that the court
below was on firm ground when it held that the claim for cash in
lieu of provision of health facilities was asking the respondent for
something that had not been agreed upon or contemplated at the
time the contracts were executed. He submitted that Davis
Contrators Ltd. v Fareham UDC10 dealt with the principle of
frustration from the premise that a contract is frustrated when
without default of either party, as in this case, the contract
becomes incapable of performance as the circumstances in which
performance is required would render a thing radically different
from what was undertaken in the contract.
He
submitted
that
the
court
below
stated
what
considerations it made in order to establish whether performance
following the frustrating event, would differ radically from what
was initially agreed between the parties. He further referred us to
Chitty on Contracts (supra) at page 1351 where it is stated that:
“At common law, frustration does not rescind the contract
ab initio; it brings to an end forthwith, without more,
J20
(574)
automatically in the sense that it releases both parties from
any further performance of the contract. A court does not have
the power to allow the contract to continue and just adjust its
terms to the new circumstances”.
He argued the common law position is consistent with the
Law Reform (Frustrated Contracts) Act. That the appellants seek to
rely on section 3(3) of that Act, to assert the respondent is liable to
pay the monetary value of their services pre-termination in lieu of
a hospital benefit post-employment. That section 3(3) (a) and (b)
give a guide on specific considerations the court will make to
determine the value of the benefit; in terms of paragraph (a) the
court will consider the amount of any expenses incurred before the
time of discharge by the benefitted party in, or for the purpose of,
performance of the contract, and any sums paid or payable by him
to any other party in pursuance of the contract and retained or
recoverable by that party under subsection 2 of the said Act.
He submitted, PWs 1, 2 and 3 failed to produce pay slips to
show that the respondent deducted any money from their salaries
to enable them enjoy the benefit during and post-employment or
proof of having been put to any expense in the performance of
their contracts which would warrant payment by the respondent
J21
(575)
and for which they were not compensated by way of remuneration
in their monthly salary; and that they did not provide the court
with the basis upon which to apply section 3 of Cap 73.
Counsel also argued, that section 3(a) of Cap 73 should be
read together with section 3(b) which empowers the court to
consider the effect, in relation to the said benefit, of the
circumstances giving rise to the frustration of the contract, which
in this case, were out of the control of the respondent and the
benefit had long ceased to be received by the respondent as the
contracts had been terminated before the frustrating event.
Additionally, Mr. Kaite submitted, when asked by the Court,
that the Government, in privatising the respondent, acted as a
Sovereign and not in its capacity as shareholder, and that there
was no action by the members of ZCCM Limited or the board of
ZCCM Limited in effecting the decision to privatise the company.
He urged us to dismiss the appeal.
We have critically considered the evidence on record, the
judgment of the court below and the submissions of learned
Counsel on both sides, for which we are grateful. We propose to
J22
(576)
deal with both grounds of appeal successively. In doing so, we will
address our minds to the following four issues:
1. Whether the privitisation of the hospitals and clinics in
question was a frustrating factor on the appellants’ postemployment contracts for access to the health facilities;
2. Whether the action of the Government to privatise the
hospitals and clinics was foreseeable by the respondent
and/or was it self induced;
3. Whether the appellants were entitled to payment of cash
as damages in lieu of provision of medical services; and
4. Whether the Government as majority shareholder of the
respondent had provided against the risk of privitisation
As regards whether the contracts for access to the health
facilities were frustrated by privitisation, we agree with Chitty on
Contracts (2008), at paragraph 23-001, that a contract may be
discharged on the ground of frustration when something occurs
after the formation of the contract which renders it physically or
commercially impossible to fulfil the contract or transforms the
obligation to perform into a radically different obligation from that
undertaken at the moment of entry into the contract.
We also agree with both learned Counsel that of importance
in deciding whether a contract is frustrated is that the event
J23
(577)
cannot have been in any way induced by either of the parties; and
that any supervening event must be unforeseeable and vitiated by
entirely external factors. Halsbury’s Laws of England, 4th Edition,
at paragraph 899, puts the matter as follows:
“The doctrine of frustration is in all cases subject to the
important limitation that the frustrating circumstances must
arise without fault of either party; that is the event which a
party relies upon as frustrating his contract must not be selfinduced.
The defence of frustration can therefore be defeated by proof of
fault, and the burden of proof lies upon the party alleging it.
Deliberate choice either not to perform or to put performance
out of one’s power will certainly be fault within this rule....”
In Walton Harvey Ltd. v Walker & Homfrays Ltd2, discussed
by both learned Counsel in their Heads of Argument, the
defendants granted the plaintiffs the right to display an advertising
sign on the defendant’s hotel for seven years. Within that period,
the hotel was compulsorily acquired, and demolished by a local
authority, acting under statutory powers. It was held, precisely,
that the contract was not frustrated because the defendants knew,
and the plaintiffs did not, of the risk of compulsory acquisition and
they could have provided against that risk, but they did not.
J24
(578)
Similarly, in Maritime National Fish v Ocean Trawlers4,
both parties knew that the use of the hired steam trawler, without
a licence was illegal. Maritime National Fish applied for five
licences from the Canadian Government, for the five trawlers they
were using. However, only three licences were granted. They did
not name the St. Cuthbert from Ocean Trawlers as one of the
licenced vessels and refused to go through with the hire; on the
grounds the contract was frustrated. Their appeal was, properly,
rejected on the ground that they themselves had taken on the risk
that some licences may be denied, and by thereby not allocating a
licence to the hired trawler, the frustration was self-induced.
In Davis Contrators Ltd. v Fareham UDC10, cited by Mr. Kaite,
the plaintiff pleaded that the weather and labour shortages, which
were unforeseen, had frustrated the contract to build houses in
eight months at a fixed price, after the work took much longer and
cost more than anticipated. The House of Lords, and rightly in our
view, declined to render the contract frustrated purely because the
price of labour and materials had increased.
J25
(579)
As to whether performance of a contract can be frustrated by
changes in the law, Halsbury’s Laws of England (supra), puts the
matter as follows at paragraph 902:
“Where performance of the contract has been rendered
impossible by an Act of Parliament passed after the contract
was made, then the promisor is excused from performing his
promise (unless it appears that he intended to bind himself
with reference to the future state of the law), for the
presumption is that the parties intend to contract with
reference to the law as existing at the time when the contract
is made”.
This is affirmed by Chitty on Contracts (2008), at paragraph
23-022, where it is stated:
“A subsequent change in the law or in the legal position
affecting a contract is a well recognised head of frustration;
Parliament or another authority may intervene by legislative
action, or the Government may exercise the royal prerogative
or administrative powers so as to affect the legal situation of
the contracting parties”.
In Sam Amos Mumba v Zambia Fisheries and Fish Marketing
Corporation Ltd1, a decision of the High Court, which the learned
trial Judge relied upon, the plaintiff claimed damages for breach of
contract of employment, claiming his conditions were altered and
some not fulfilled. The defence was frustration, that the conditions
J26
(580)
were altered as a result of the Mwanakatwe Salaries Commission
followed by a Government white paper which directed that all
salaries of permanent employees were to be within Government’s
recommendations. The plaintiff challenged the implementation of
the recommendations as unlawful.
Sakala, J (as he then was) held, inter alia:
“(ii) A subsequent change in the law or in the legal position
affecting a contract is a well recognised head of frustration. At
common law, the occurrence of a frustrating event terminates
the contract forthwith...
(iii) The Government directives to the defendant company were
a frustrating event and put an end to the contract between the
parties...”
He referred to Davis Contrators Ltd. v Fareham UDC10 at pages
720-721, which is cited here by Mr. Kaite, where Lord Reid stated:
“It appears to me that frustration depends, at least in
most cases, not on adding any implied term, but on the true
construction of the terms which are in the contract read in light
of the nature of the contract and of the relevant circumstances
when the contract was made.”
Sakala, J also quoted Viscount Simon in British Movietonews
Ltd and District Cinemas Ltd.11 at page 185 where he stated:
J27
(581)
"If, on the other hand, a consideration of the terms of the
contract, in the light of the circumstances existing when it was
made, shows that they never agreed to be bound in a
fundamentally different situation which has now unexpectedly
emerged, the contract ceases to bind at that point - not
because the court in its discretion thinks it just and reasonable
to qualify the terms of the contract, but because on its true
construction it does not apply in that situation."
He also quoted Lord Wright in Fribrosa Spolka Akoyjina v
Fairbairm Lawson Combe Barbour Ltd12 at page 70 as follows:
"In my opinion the contract is automatically terminated as
to the future because at that date its further performance
becomes impossible in fact in circumstances which involve no
liability for damages for the failure on either party."
In the present case, we accept the established position that
the company is at law a different person altogether from the
subscribers or shareholders. Certainly, the celebrated case of
Salomon v Salomon9 on the point is still good law. Therefore, as
submitted by Mr. Kaite, the respondent as the company, and the
Government, as majority shareholder, are not one, and the same
person at law. It is also trite law that a company, as a body
corporate and a legal personality, can only do things through its
officers, even though shareholders as beneficial owners of a
company have and enjoy as of right, overriding authority over the
J28
(582)
company’s affairs even over the wishes of directors (Zambia
Consolidated Copper Mines Ltd v Kangwa and others13).
On the other hand, the preamble to the Privatisation Act,
which is the subsequent legislation, provides as follows:
“An Act to provide for the privatisation and
commercialisation of State owned enterprises; to provide for
the establishment of the Zambia Privatisation Agency and to
define the functions of the Agency; to provide for the sale of
shares in State owned enterprises; and to provide for matters
connected with or incidental to the foregoing.”
On the basis of all the above mentioned, we are satisfied that
although the Government was the majority shareholder in the
respondent company, the decision to commercialise and/or sell
shares in State owned enterprises, including the respondent, and
the enactment of the Privatisation Act, was made by the
Government as a Sovereign, and not in its capacity as shareholder.
It is cardinal to comprehend that the policy to privatise did
not single out the respondent; it affected all State owned
enterprises as can be seen from the preamble to the Privatisation
Act. As correctly argued by Mr. Kaite, there was no action by
members of ZCCM Limited or the board of directors in general
meeting in effecting the decision to privatise the company. The
J29
(583)
decision to privatise State owned enterprises was an exercise of
the administrative or governmental or executive powers of the
State. It was a directorial decision which unfortunately affected the
legal situation of the parties to the post-employment contracts.
Even if we were to admit that the decision to privatise ZCCM
Limited and/or the health facilities in question was made by the
Government as shareholder of the company, Halsbury’s Laws of
England (supra), at paragraph 899 puts the matter as follows:
“...... A state trading enterprise, although subject to its
government’s direction and control and a party to
governmental legislation which rendered performance of a
contract to which it was a party illegal, was not precluded
from relying on frustration as a defence, since it had a
separate legal existence.”
On the whole matter, the learned trial Judge was on firm
ground when he held that the agreement between the appellants
and the respondent relating to the provision of health services
after separation was frustrated by the action of the Government
when it privatised the hospitals and clinics previously operated by
the respondent and that the respondent could not be held liable.
J30
(584)
Mr. Chabu
argued
firmly
that
if
the
contracts
were
frustrated, we must find that the frustrating event was self
induced, in that the Government was the majority shareholder in
the company, so its decision to privatise the health facilities was
inevitably the decision of the respondent. Whilst it is quite clear to
us that a party cannot rely on an event which was self induced, or
should have been, foreseen by him but not by the other party, in
this case, we are disposed to agree with Mr. Kaite that the
circumstances before us are distinguishable, from those obtaining
in Walton Harvey Ltd v Walker Homfrays Ltd2, and Maritime
National Fish v Ocean Trawlers4 relied on by Mr. Chabu.
We are persuaded, on the strength of the various authorities
referred to in our judgment, especially Halsbury’s Laws of
England, at paragraph 899 (supra), that the respondent, as a state
trading enterprise, although subject to the Government’s direction
and control was not precluded from relying on frustration as a
defence, since it had a separate legal existence. The Government
was the majority shareholder of the respondent, and it made the
decision to privatise, but as we have already said, the decision was
a governmental, executive or directorial decision.
J31
(585)
Furthermore, even as we take judicial notice of the fact that
the privatisation of the respondent did not occur overnight, it
would be absurd to believe that it was envisaged by the
respondent at the respective times of contracting.
Chitty on Contracts (2008) at paragraph 23-016 states:
“The test for frustration is objective; and not a subjective
inquiry into the actual or presumed intentions of the parties,
since the discharge of a contract on the ground of frustration
occurs automatically upon the happening of the frustrating
event, and does not depend upon any repudiation or other act
of volition on the part of either party; and the fact that the
parties, at the time of contracting, actually foresaw the
possibility of the event or new circumstances in question does
not necessarily prevent the doctrine of frustration from
applying”.
For these reasons, we reject the argument by Mr. Chabu that
the frustrating event was self induced, and/or foreseen by the
respondent or that this case falls within the exceptions to the
doctrine of frustration. The frustrating event was not a deliberate
act by the respondent to escape its contractual obligation to
provide post-employment health services to the appellants.
Therefore ground 1 of the appeal fails.
We turn now to ground 2 concerning whether the appellants
were entitled to payment of money as damages in lieu of provision
J32
(586)
of medical services. It is Mr. Chabu’s contention that the
privatisation is something the respondent had foreseen, it could
have prevented the risk by paying the appellants money in lieu of
provision of health services.
Conversely, Mr. Kaite submitted that from the evidence of
PWs 1, 2, and 3, they were employed in 1976, 1965 and 1982
respectively, and that privitisation could not have been foreseen at
the time of contracting, so the respondent could not have provided
against the risk. He further argued that the appellants’ contention
that privitisation was foreseeable on the basis of events that
occurred immediately before the frustrating event is untenable as
what must be considered are events at the time of contracting.
The appellants’ contention in the court below was that
accessing the health facilities had become an entrenched or
accrued post-employment right upon separation such that the
Privatisation Act which the respondent was relying on and which
did not specifically abrogate that condition was of no legal effect.
Mr. Chabu is right that in Jacob Nyoni v Attorney General7, we
held that the amendment to the law did not take away the right as
J33
(587)
the amending Act did not specifically abrogate the accrued right
which became entrenched in the appellants’ conditions of service.
While it is trite that an accrued right cannot be taken away,
the question in this case is, what right did accrue to the appellants
that the respondent has taken away? It is agreed that when the
employment
contracts
were
executed,
and
undeniably
at
separation, the respondent undertook to provide health facilities to
the appellants depending on the mode of separation. Thus we
accept that the appellants had the right to attend the respondent’s
hospitals after they were separated. But there was no evidence
before the lower court, that the appellants had the option to trade
off that right for some monetary equivalent value.
We also acknowledge, the undisputed fact that the appellants
were turned away from the hospitals, not by the respondent, but
by the new owners who put in place new regulations of access
following the privatisation of the health facilities; even if it seems
that the respondent would settle costs of treatment at Government
and private hospitals as long as receipts were produced.
J34
(588)
Nevertheless, the learned authors of Halsbury’s Laws of
England (supra) assert at paragraph 910, that the court must look
at the matter on the basis of the facts known to the parties at the
time of the event interfering with the contract and the probabilities
as they then appeared, and not in the light of later events which
may show that the contract could in fact have been performed.
It is apparent that whilst PWs 1, 2, and 3 likened their
situation to the rest of the appellants; they said little about when
the other appellants were separated and the letters of separation
are not part of the record of appeal. However, we have approached
the matter from the undisputed fact that all the appellants were
separated between 1998 and 1999. That being the case, for the
appellants who were declared redundant before 31st March, 1999,
the 1 year period within which they were entitled to access the
health facilities had lapsed at the time of privatisation on 1st April,
2000. For the other appellants, we repeat that there was no
established right of trading off the acquired right for cash.
Consequently, the learned Judge was correct that the claim
for payment of cash in lieu of the provision of health facilities was
J35
(589)
asking the respondent for something that was not agreed upon or
contemplated at the time of employment of the appellants and that
payment of cash as damages in lieu of provision of medical
services would render such performance something radically
different from that undertaken by the respondent.
As to whether the Government provided against the risk of
privatisation, Mr. Chabu argued that the appellants were entitled
to be compensated out of the Reserve Account in terms of section
39 of the Privatisation Act. Clearly this section provides that net
proceeds from completed sales of shares and assets shall be paid
into a Privatisation Revenue Account established by the Minister
responsible for finance and held at the Bank of Zambia; and that
with the prior approval of the said Minister, the proceeds of sale
may be used, inter alia, for funding the cost of privatisation and
the Privatisation Trust Fund, and supporting redundancy payment
schemes in consultation with the Ministry responsible for labour.
Indeed, in Zambia Oxygen Limited and another v Paul
Chisakula and others5, we dealt with the interpretation of section
39 of the Privatisation Act and we held that the said Act stipulates
J36
(590)
that the proceeds of privatisation are to be available to support
redundancies or retrenchments; and that conditions of service,
already being enjoyed by employees cannot be altered to their
disadvantage without their consent.
However, as argued by Mr. Kaite, the facts of that case are
distinguishable from the case before us. In that case, it was
argued, on behalf of the Zambia Privatisation Agency, that the
employees were not privy to the agreement between the appellants
under which the Zambia Privatisation Agency was to provide funds
to Zambia Oxygen Limited for the payment of benefits to the
employees. In addition, Zambia Oxygen Limited had unilaterally
changed the employees’ conditions of service. The issue of
frustration of the employment contracts never arose.
Unfortunately, we cannot, on the basis of the foregoing,
affirmatively pronounce that the circumstances of this case fall
within the ambits of section 39 of the Privatisation Act or that the
Government provided against the risk of privatisation, when the
Government and/or the Zambia Privatisation Agency are not
parties to this appeal and there was no arrangement or
J37
(591)
understanding between the Zambia Privatisation Agency and the
respondent as was the case in the Zambia Oxygen Limited5 case.
As rightly submitted by Mr. Kaite, the Zambia Privatisation
Agency, and not the respondent, would have been responsible to
pay money out of the Privatisation Revenue Account. However, we
have already made the point that the appellants’ post-employment
right to access the respondent’s hospitals and clinics did not
entitle them to payment of monies in lieu thereof.
Mr. Chabu has spiritedly argued, that the respondent had a
statutory obligation by virtue of sections 3(1) and 3(3) of the Law
Reform (Frustrated Contracts) Act, Cap 73, to pay monies in lieu of
provision of health services, notwithstanding that the respondent
ceased to have control over the hospitals and clinics.
Regrettably, though Mr. Kaite responded to this argument,
the issue that the appellants have raised now under the Law
Reform (Frustrated Contracts) Act were not raised in the court
below. We have said many times that where an issue was not
raised in the court below, it is not competent for any party to raise
it in a higher court (See e.g., Mususu Kalenga and another v
J38
(592)
Richman’s Money Lenders Enterprises14). For this reason, we
decline to go into the issue of whether or not the appellants were
entitled to recover any payments under the said Act.
It is Mr. Chabu’s further contention that even if privatisation
was held to be a frustrating event, the appellants were entitled to
the remedies as pleaded because the respondent had been making
monthly deductions from their salaries for purposes of health
services to be rendered to them after the end of employment.
It is quite clear to us that the appellants did not prove, before
the lower court, that deductions were made from their salaries for
purposes of health services to be rendered to them after the end of
employment. PWs 1 and 2 conceded, in cross-examination, that
the alleged deductions of K150.00 or K200.00 were not shown on
their monthly pay statements.
What's more, there was no proof that any of them were
turned away from the hospitals or clinics before the frustrating
event or that they incurred expenses for treatment before or even
after the frustrating event. Whilst PW1 testified that he attended
J39
(593)
treatment at other hospitals, after he was turned away from the
health facilities in issue, he too provided no documentary proof.
As we have said in a plethora of cases, he who asserts a
claim in a civil trial must prove on a balance of probabilities that
the other party is liable.
In this case, the appellants did not
discharge their evidential burden. In sum ground 2 equally fails.
Both grounds having failed for the reasons stated in our
judgment, we dismiss the appeal. However, we order that each
party will bear own costs of this appeal.
_________________________________
H. CHIBOMBA
SUPREME COURT JUDGE
__________________________________
R. M. C. KAOMA
ACTING SUPREME COURT JUDGE