MBCA Bank Limited v Tawanda Mwaenga

### Preamble
Judgment No. SC 120/20
1
Civil Appeal No. SC 767/17
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REPORTABLE		(113)

MBCA     BANK     LIMITED

V

TAWANDA     MWAENGA

SUPREME COURT OF ZIMBABWE

MAKARAU JA, GOWORA JA & HLATSHWAYO JA

HARARE: JUNE 11 2019, & OCTOBER 1, 2020

E.T Moyo, for the appellant

T.Zhuwara, for the respondent

GOWORA JA:		The respondent was formerly employed by the appellant in the retail department at its Southerton Branch. In March 2015 he was charged with committing an act, or omission inconsistent with the fulfilment of the express or implied conditions of his contract of employment in terms of category D of the Collective Bargaining Agreement S.I. 273/2000, (the “CBA”).

Following disciplinary proceedings under the CBA the respondent was found guilty of the charge and dismissed from employment. He appealed to the Appeals Board which reached a deadlock and referred the matter to the NEC Appeals Board for the banking industry. This body set aside the penalty of dismissal, ordered his reinstatement and substituted a final written warning instead of the dismissal.

The appellant appealed to the Labour Court which dismissed the appeal with costs. This appeal is against the judgment dismissing its appeal.

THE FACTS

The allegations against the respondent arose from the following events. During the period extending from 13 January 2015 to 22 January 2015 the respondent was absent from his post without leave. Upon his return he indicated that he had been incarcerated at Harare Central Prison under a writ for civil imprisonment issued against him for failure to pay a debt. He explained that he had obtained a loan from CBZ Bank for a business venture and had failed to pay the loan. CBZ Bank successfully sued him for the debt and when the judgment went unsatisfied, CBZ Bank applied for his civil imprisonment.

Arising from these facts, the appellant was of the view that the actions of respondent, in entering into a business venture, were in direct conflict with its policy which required employees to disclose to it in writing, any involvement or interest that an employee might have in any company or business that might put such employee in conflict with an undertaking made by the employee in line with the policy. He was as a consequence charged with misconduct, as defined in the CBA, viz; any serious act, conduct or omission inconsistent with the fulfilment of the express or implied condition of his contract of employment.

On 9 March 2015, the respondent was summoned to attend a hearing on the charge. He attended and denied the charge. The disciplinary authority found him guilty of the charge and he was, as a consequence, dismissed from his employment. He appealed to the Grievance and Disciplinary Committee Board (the Appeals Board). The Appeals Board failed to arrive at a unanimous decision and declared a deadlock.

In turn, the Appeals Board referred the matter to the National Employment Council (the N.E.C) Appeals Board for the Banking Undertaking (the N.E.C Appeals Board). The N.E.C Appeals Board found that there was no breach by the respondent of the appellant’s policy on disclosure of business interests likely to be in conflict with the business of the appellant. It further found that the civil matter between the respondent and CBZ Bank did not go to the root of the employment contract between the appellant and the respondent. Accordingly, it ordered that the respondent be reinstated without loss of benefits, set aside the penalty of dismissal and instead, substituted the penalty of dismissal with a final written warning. It also ordered, as an alternative to the reinstatement, that the respondent be paid damages if the employment relationship was no longer tenable.

The appellant was aggrieved and appealed to the Labour Court. The Labour Court dismissed the appeal.

PROCEEDINGS BEFORE THE COURT A QUO

The appeal before the Labour Court was premised on the manner in which the N.E.C Appeals Board exercised its jurisdiction as an appellate tribunal. The appellant contended that the N.E.C Appeals Board had misdirected itself in three critical aspects; by finding that the respondent’s acts did not amount to a conflict of interest with the appellant’s business; that his actions did not pose a reputational risk to the appellant and by substituting a penalty of final written warning to one of dismissal. The last issue, it was argued was a clear sign that it had concluded that the respondent was guilty of the misconduct charge preferred against him.

The court a quo made a finding that the appellant had failed to establish that the respondent had breached its policy on restraint of trade. The Labour Court as a consequence, found that there was no conflict arising from the business venture that respondent intended to embark on and the appellant’s business. The court concluded further that the actions of the respondent did not pose a reputational risk to the appellant. The court a quo made a finding that the appellant had failed to establish that the respondent had breached its policy on restraint of trade. It further found that the N.E.C Appeals Board had found that the appellant had failed to establish on a balance of probabilities, that it had suffered reputational damage. It endorsed both findings.

Ultimately, the court a quo opined that it was disabled, as an appellate court from interfering with factual findings of a trial tribunal and as a consequence it dismissed the appeal.

THE APPEAL

The appellant is aggrieved and has appealed to this Court with leave. The following are the grounds upon which the appeal is premised:

“1.  The court a quo grossly misdirected itself and erred at law in finding that the

respondent had not contravened the appellant’s disclosure of business interest

policy by taking a loan to finance his business interests without disclosing same to

the appellant.

2.	The court a quo grossly misdirected itself and erred at law in finding that the respondent’s action of taking a loan for the purpose of establishing a business interest without the appellant’s knowledge, did not pose a potential conflict to the appellant’s business.

3.	The court a quo erred at law by misconceiving the nature of jurisdiction exercised by the N.E.C Appeals Board and concluding that it had made factual findings which the court would not interfere with.

4. The court a quo further misdirected itself and erred at law by failing to set aside the decision of the N.E.C Appeals Board, interfering with the decision to dismiss the respondent in the absence of gross misdirection in the exercise of discretion by the disciplinary officer.”

From the above grounds, two issues fall for determination. The first is whether the appellant had established that the respondent had contravened the appellant’s policy on disclosure of business interests likely to conflict with its own. Aligned to this, and fundamentally more pertinent issue, is whether or not the action of obtaining a loan on the part of the respondent posed a potential conflict with the appellant’s business interests. The second issue is whether the N.E.C Appeals Board exercised its jurisdiction properly in setting aside the penalty of dismissal and substituting one of final written warning and whether the court a quo was correct in upholding its decision on that issue.

In my view, the last ground is the critical ground. Had the N.E.C Appeals Board not interfered with the findings of fact, the appeal might have been premised on completely different bases. A determination of the exercise of that jurisdiction impacts on its findings and is dispositive of the appeal.

WHETHER THE APPEALS BOARD PROPERLY EXERCISED ITS JURISDICTION

Before us, Mr Moyo, criticised the court a quo for failing to find that the N.E.C Appeals Board had improperly exercised its jurisdiction. It was contended that there was a misconception on the part of the court a quo that it was disabled from interfering with the findings of fact made by that body. The submission made was that only the initial disciplinary body made findings of fact and that the N.E.C Appeals Board sits as an appellate tribunal and on that premise its findings of fact were liable to be interfered with by the court a quo.

Mr Moyo, on behalf of the appellant, has argued that the court in making this conclusion misdirected itself. He contended that the N.E.C Appeals Board was an appellate tribunal which had itself interfered with the factual findings of the disciplinary authority. He is correct in this contention. The NEC Appeals Board had set aside the factual findings of the disciplinary authority. In so doing, the N.E.C Appeals Board did not suggest that the disciplinary authority was irrational in any manner in finding as it did that the respondent had breached his obligation to disclose any interest in a business venture that he had embarked on or was about to embark on.

The respondent understandably took a contrary position. He contended that the court a quo was correct in finding that there were no facts placed before it to justify an interference with the findings made by the N.E.C Appeals Board.

On those issues, the Labour Court, being of the view that the N.E.C Appeals Board had made factual findings, refused to interfere with its decision. In dealing with this aspect of the appeal the learned judge in the court found that:

“The N.E.C Appeals Board found that the complainant failed to support the issue of reputational risk on a balance of probabilities.

This Court, sitting as an appellate court, did not have the advantages that were enjoyed by the trial tribunal and cannot easily interfere with findings of the trial tribunal a quo unless it was satisfied that having regard to the evidence placed before the tribunal a quo, the findings complained of are so outrageous in their defiance of logic or accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at that conclusion.”

The learned judge was correct as regards the test to be applied. She was however, mistaken as to the proceedings to which the test should have been applied. The N.E.C Appeals Board was not the trial tribunal. It was an appellate tribunal and the principle that the court had regard to ought to have been applied in considering the exercise of jurisdiction by the N.E.C Appeals Board.

The position is settled that an appellate court is precluded from interfering with findings of fact by a trial court except in very exceptional or limited circumstances. It is also settled that in order to interfere with such findings of fact, the appellate court must be satisfied that the trial court, in making its findings on the facts, was irrational or that its findings were so outrageous in their defiance of logic or accepted moral standard that no sensible person who had applied his mind to the question to be decided could have arrived at the same conclusion.

In disciplinary proceedings findings of fact are the preserve of the disciplinary committee or, as was the position in this case, the disciplinary authority. That this is the law has been stated by this court in a plethora of authorities. In Muyaka v BAK Logistics (Pvt) Ltd SC 39/17, UCHENA JA stated:

“Findings of fact in any proceedings except where an appeal is heard in the wide sense (a rehearing) are made by the initial disciplinary authority, tribunal or court of first instance.  They can, except in the case of an appeal in the wide sense, only be made once by such disciplinary authority, tribunal or court.  In this case, they were made by the initial disciplinary authority.  Thereafter from the respondent’s internal appeals officer to the Labour Court, the task was not to make findings of fact, but to assess the findings of fact made by the disciplinary authority against the standard of gross unreasonableness in the circumstances they were made.  The arbitrator could therefore not make factual findings.  The appellant therefore laboured under a misconception in thinking that the arbitrator makes factual findings.  As a result, I dismiss the first ground of appeal on the ground that it proceeds on the mistaken view that the arbitrator made findings of fact.”

In an earlier case, Zinwa v Mwoyounotsva SC 28/15, this court stated:

“It is settled that an appellate court will not interfere with factual findings made by a lower court unless those findings were grossly unreasonable in the sense that no reasonable tribunal applying its mind to the same facts would have arrived at the same conclusion; or that the court had taken leave of its senses; or, put otherwise, the decision is so outrageous in its defiance of logic that no sensible person who had applied his mind to the question to be decided could have arrived at it: or that the decision was clearly wrong.”

The position of the law is as set out in the above authorities. In my view this is the law that ought to have guided the determination of the appeal in the court below. Those remarks apply with equal force in this appeal. The court a quo was obligated to consider the manner in which the N.E.C Appeals Board dealt with the appeal before it.

Instead, the court a quo dealt with the issue as if the N.E.C Appeals Board was the tribunal of first instance. Clearly the N.E.C Appeals Board sat to consider the matter on the record. It was bound by the record and could only set aside findings of fact by the disciplinary authority on the principles set out above. It did not do so. This was a misdirection on the law. Equally, the court a quo, by not treating the appeal before it on the record and applying the proper test on the exercise of jurisdiction by an appellate tribunal was also guilty of misdirection. The appeal succeeds on this ground.

It now falls for me to consider whether the N.E.C Appeals Board exercised its jurisdiction properly. This issue is not only crucial it is critical in the determination of the correctness of the approach to the appeal by the N.E.C Appeals Board. The disciplinary authority found as a fact that the respondent had been availed working capital by CBZ Bank. He stated that the respondent had shown an intention to commence a business venture. He said that the appellant had established that it had suffered reputational harm when the respondent was removed from the premises by the Messenger of Court pursuant to a warrant of civil imprisonment. He said that the arrest had placed the bank at risk because of the respondent’s behaviour.

The N.E.C Appeals Board set aside all the factual findings. It said the following:

“The Appeals Board acknowledges that any business could potentially birth a conflict of interest, which is why it stresses the conflict part. In essence, it does not say employees should not have business, but rather calls on them to be mindful not to conflict with the Bank business.

Furthermore, the Appeals Board observed that in the Minutes of Appeals Committee, held on 1 April 2015, the Management representative made the following submissions:

“1. 	Appellant failed to honour his debt with CBZ, and this gave him a bad standing as a banker, given that the bank checks for this type of information through FCB before one is employed by the Bank.

Appellant failed to declare his business to the bank and this would fall under failure to follow instructions.

The arrest caused disruption of work but it was not severe.

There was risk of reputational risk, as the newspapers may pick the matter in the future (sic).

Submission 2 and 3 were supported by other two workers representatives. However, the complainant failed to support the issue of reputational risk on a balance of probabilities leading to the Appeals Board focusing on the appellant’s debt issue with CBZ.

The Appeals Board therefore concluded that there was never a breach of this particular policy (outside interests/conflict of interest). Whilst the Board acknowledged that the civil matter is of concern to the employer, the record does not show that it goes to the root of the employment relationship.”

The clause in question reads:

“RESTRAINT

I undertake that during my employment with MBCA I shall devote my whole business attention to MBCA and I further undertake that during this time I will not, without the consent of the Chairman and Managing Director of MBCA, be engaged or interested either directly or indirectly in any capacity in any trade, business or occupation whatsoever and particularly in banking or finance activities other than the business of MBCA. This undertaking will not prohibit the holding, whether directly or indirectly, or through nominees or quoted investments of up to ten percent of the shares or stocks of any class of anyone company. In this clause occupation shall include membership of or interest in any other public or private work which in the opinion of MBCA may hinder or otherwise interfere with the performance by me of my duties with MBCA.

DISCLOSURE OF BUSINESS INTERESTS

As soon as it becomes known to me I undertake to advise MBCA in writing of any involvement that I/and or the parties specified hereunder may have in any company or business that may put me in conflict with the above undertaking.”

Before this Court counsel for both parties focused on the clause on restraint of trade. Both counsel only addressed the court on the applicability of the restraint clause to the relationship between the appellant and the respondent.

The appellant submitted that it has in place a disclosure of business interest policy which the respondent signed. In terms of that policy, the respondent, as an employee, was required to advise it in writing of any involvement that he might have in any company or business that might place him in conflict with the undertakings made in the policy. The undertakings that are envisaged under the policy are; that he shall devote his whole business attention to the appellant that he would not, without the consent of the chairman or managing director of the appellant, be engaged or interested, either directly or indirectly in any capacity in any trade, business or occupation whatsoever and particularly in banking of finance activities other that of the appellant. It was contended that the undertaking expressly related to all dealings undertaken or to be undertaken by the respondent or any members of his immediate family. Thus, it was contended that the Labour Court grossly misdirected itself by finding that it had not been shown that there was a business that the respondent had ventured into leading him into conflict with the appellant as provided for in the policy.

It seems to me that the Labour Court decided the appeal on two issues, specifically relating to the restraint of trade condition in the appellant’s policy documents and the allegations that the respondent’s financial issues with CBZ Bank had resulted in reputational harm to the appellant.

THE LAW ON RESTRAINT OF TRADE IN EMPLOYMENT CONTRACTS

In Zimbabwe Mining and Smelting Company v Zakeyo SC 70/06, this Court said:

“On the second count, the general rule, the breach of which founded the ground of misconduct with which the respondent was charged, is that any person who is in a relationship where he has a duty to act in the best interests of the other party is not allowed to put himself in a position where personal interest conflicts, or might conflict, with the interests of one whom he is bound to protect.

The rule, which is said to be of universal application, was stated by LORD CRANWORTH LC in his celebrated speech in Aberdeen Ry Co v Blaikie (1854) 1 Macq. 401 at p 471. In Regal (Hastings) Ltd v Gulliver and Ors [1942] 1 ALL ER 378 at p 382A VISCOUNT SANKEY quoted with approval from the LORD CHANCELLOR’s speech where it was said:

“A corporate body can only act by agents, and it is of course the duty of those agents so to act as best to promote the interests of the corporation whose affairs they are conducting. Such agents have duties to discharge of a fiduciary nature towards their principal. And it is a rule of universal application that no-one having such duties to discharge shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting or which possibly may conflict with the interests of those whom he is bound to protect." See also Robinson v Randfontein Est. G.M. Co. Limited 1921 AD 168 at 177–178.”

The court proceeded to find that the duty to disclose does not depend upon proof of the existence of actual conflict of duty and self-interest only. The court further found that it was sufficient for the purposes of enforcement of the rule that there be a potential conflict of duty and self-interest arising from the engagement entered into or about to be entered into by the employee. I respectfully adopt the principle set out therein.

In Phipps v Boardman [1967] AC 46 at p 111 LORD HODSON said:

“… even if the possibility of conflict is present between personal interest and the fiduciary position the rule of equity must be applied.”

In Greendale Hardware & Electrical (Pvt) Ltd 2007 (2) ZLR 17, at 24D-25A the court said:

“I now turn to answer the question for determination in the appeal.  The correct test for the validity of a restraint of trade in a contract of employment is whether there are proprietary rights for the protection of which the restraint was imposed by the employer and undertaken by the employee.  If there are proprietary interests to be protected the next question is what are they being protected against and is the restraint more than is reasonably necessary for the protection of the proprietary interests.

In Herbert Morris Limited v Saxelby [1916] AC 688 at 710, LORD PARKER said:

“… the reason, and the only reason, for upholding such a restraint on the part of an employee is that the employer has some proprietary right,  whether in the nature of trade connection, or in the nature of trade secrets for the protection of which such a restraint is ... having regard to the duties of the employee ... reasonably necessary.”

A restraint of trade is an obligation voluntarily undertaken by the employee to refrain from the exercise of freedom of trade in favour of the employer in the exercise of freedom of contract.  It is therefore prima facie valid and the onus is on the employee who seeks to resile from its burden to show that it is nonetheless against public interest and unenforceable.  See Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874(A); Book v Davidson 1988(1) ZLR 365(S) at 385D.

A restraint of trade which does no more than protect the employer against mere competition from a former employee by preventing him or her from carrying on business similar to that undertaken by him or entering the services of an undertaking carrying on business similar to that undertaken by him in fear that in doing so the employee would exercise the knowledge and skill acquired during employment with him is an unreasonable restraint.  So is a restraint of trade which is too wide as to time or place or scope depending, of course, on the nature of the business carried on and the duties of the employee.”

It is thus settled that generally an agreement in restraint of trade is prima facie valid and enforceable. It will however, only be enforced if it is reasonable as between the parties and not contrary to the public interest. Consequently, a restraint must serve some interest of the person in whose favour it has been inserted. In employment contracts, courts have been loath to enforce covenants in restraint of trade in the absence of any other interest being protected. Clauses in employment contracts whose sole aim was to avoid competition between the employer and the employee, in the absence of any other ground such as protection of trade secrets, have not been enforced.

In ZIMASCO v Zakeyo (supra), the applicability of the rule was discussed by the court. The court was of the view that the application of the rule was not confined to situations where actual or potential conflict of interest during the execution of duties by the employee existed. The rule had its roots in general standards of loyalty, good faith and the avoidance of conflict of duty and self-interest on the part of an employee. Thus, the employee, before embarking upon a business venture in conflict with the employer’s interest, had a duty to disclose such venture.

ANALYSIS OF THE FACTS AS AGAINST THE LAW

The restraint of trade clause in this case became the basis of a charge of misconduct. There was no suggestion on the part of the respondent that it was too onerous and as a consequence could not be the premise upon which a charge of misconduct could be preferred. There was as a whole no contention that the clause did not operate to protect the employer’s interest. All that the respondent raised as a defence was that his conduct did not amount to a breach of the clause. Thus the issue becomes a simple one, did he in fact embark upon any business enterprise against the requirements of the disclosure clause in the restraint of trade covenant.

It is evident that in the majority of cases in which employers have sought to enforce the restraint of trade clause the employment relationship would have come to an end. The rationale in most authorities that I have had regard to is that the employer in seeking such enforcement has a proprietary interest to protect. In casu, the relationship was ongoing and the restraint was enforced as a means of disciplining the employee for an alleged breach of the clause. To me, there is no distinction between the two scenarios. The employer would still have a proprietary interest to protect even where the employee is still in his employ. All that is required is for the employer to establish that the enforcement of the restrain clause is aimed towards the protection of an interest as opposed to stifling completion. In any event, an employee who is party to a subsisting employment contract cannot possibly set up business in competition with his employer.

Following upon the dicta in ZIMSCO v Zakeyo (supra), it is sufficient for the rule on disclosure to be enforced that there be “a potential conflict of duty and self-interest arising from the engagement entered or about to be entered into by the employee.” It is not necessary to prove the existence of an actual conflict of duty or self-interest.

The respondent does not deny that he obtained a loan for a business venture. All he says is that the venture did not eventuate because he was duped. He had taken such steps in entering into a business that an obligation lay upon him to disclose to the employer the interest that he had. It did not matter what nature it was. The employer required his undivided attention at the work place. The N.E.C Appeals Board set aside the factual findings of the disciplinary authority because, according to the understanding of the N.E.C Appeals Board the policy was aimed at an employee embarking on a business venture that was aligned to the finance sector.

It seems to me that the N.E.C Appeals Board misdirected itself. The policy was inclusive as opposed to exclusive. The respondent had progressed beyond a mere idea or dream. He had conceptualised a business venture which persuaded a bank to advance working capital. It covered any business that might hinder an employee from devoting his attention from the business of MBCA. This was not a clause aimed at avoiding competition, this was a clause aimed at ensuring that his day to day activities were focused on the business of the employer. He was required to disclose if any business venture to obviate any impression that his interest might conflict with that of the employer, in terms of attention to his duties and not necessarily in competition with the employer. The policy in my view was wide in terms of area of scope of the business being ventured into. There is in the clause specific mention of business of a financial nature, I do not believe that the emphasis on that nature of interest detracts from the general duty to disclose. It does say that any business of a financial nature was particularly prohibited but I do not understand the policy to give an employee the carte blanche to embark upon business venture and not disclose to the employer.

DISPOSITION

To the extent that the N.E.C Appeals Board interfered with those factual findings, my view is that such interference was not warranted in the circumstances. The N.E.C Appeals Board did not seek to justify its decision to set aside the findings of fact both on the issue of the failure to inform the bank of his interest in a business venture and the finding that the respondent’s action in being arrested had caused reputational risk. It could only have done so if it had found that the finding by the disciplinary authority was irrational or outrageous in defiance of logic or accepted moral standards. Thus, the court a quo, in failing to apply this standard to the decision of the N.E.C Appeals Board is guilty of a serious misdirection.

The other grounds of appeal depend for determination on the resolution of the decision by the N.E.C Appeals Board in setting aside the findings of fact by the disciplinary authority. A finding that its decision in this regard was a misdirection would dispose of the entire appeal. It is not necessary therefore to determine the rest of the grounds.

Accordingly, the appeal succeeds and costs will follow the result. In the premises, the following order will issue.

IT IS ORDERED THAT:

The appeal be and is hereby allowed with costs.

The judgment of the court a quo is set aside and in its place is substituted the following:

“(i)  The appeal be and is hereby allowed with costs.

(ii)   The decision of the NEC Appeals Board is set aside in its entirety.

(iii)  The decision of the disciplinary authority of 11 March 2015 dismissing

the respondent from employment is hereby upheld.”

MAKARAU JA      		:    	   I agree

HLATSHWAYO JA         	:       	    I agree

Scanlen & Holderness, legal practitioners for the appellant

Lawman Chimuriwo Attorneys at Law, legal practitioners for the respondent