Nitrogen Chemicals of Zambia Ltd v Bwalya (Appeal 38 of 2011) [2014] ZMSC 252 (10 January 2014)

JI IN THE SUPREME COURT OF ZAMBIA Appeal No.38/2011 HOLDEN AT KABWE (Civil Jurisdiction) BETWEEN: NITROGEN CHEMICALS OF ZAMBIA LIMITED APPELLANT AND LAZAROUS BWALYA RESPONDENT Coram: Chirwa, Chibomba and Phiri, JJS. On 1st November, 2011 and 10th January 2014. For the Appellant: For the Respondent: Mr. J. B. Theo of Mwansa Phiri and Partners. Mr. J. Chimembe of JMC and Associates. JUDGMENT Chibomba, JS, delivered the Judgment of the Court. Cases and Other Materials referred to:- 1. Rodgers Chama Ponde and Others vs Zambia State Insurance Corporation Limited (2004) Z. R. 151 2. Maamba Collieries Limited vs. Douglous Siakalonga and Others, SCZ Appeal No. 51 of 2004 3. Development Bank of Zambia vs, Dominic Mambo (1995-1997) ZR When we heard this appeal, Hon. Mr. Justice D. K. Chirwa sat with us. He has since retired. This Judgment is therefore, by the majority. J2 This is an Appeal against the Judgment of the Deputy Registrar at assessment whereunder the learned Deputy Registrar awarded the sums of K68,143,768.00 (K68,143.77) and K550,098,413.14 (K550,098.41) as long service gratuity, underpayment of salary, non-payment of medical and housing allowances and as pension benefits under the ZSIC Pension Scheme, respectively. The facts leading to this appeal are that the Respondent was a former employee of the Appellant who had reached retirement age of 55 years. After the Appellant paid his retirement benefits, the Respondent filed an action in the High Court at Lusaka, in which he claimed that he had been underpaid by the Appellant. He, therefore, claimed terminal benefits; interest on terminal benefits; further and other relief that the Court may deem fit and costs. Judgment in default was entered and the Deputy Registrar referred the matter of damages to assessment. At assessment, the learned Deputy Registrar received evidence in form of Affidavits, oral evidence as well as submissions from the parties. He then proceeded to re-calculate the pension including the benefits under the Pension Scheme that the Respondent had J3 been contributing to, namely, the Zambia State Insurance Corporation Limited (ZSIC) Pension Scheme. The learned Deputy Registrar then came to the conclusion that the Respondent had established some under-payments of his terminal benefits and that there was also an under payment on the ZSIC Pension Scheme. The Deputy Registrar then awarded the sums of K68,143,768 (K68,143.77) as underpayments or non-payments and the sum of K550,098,413 (K550,098.41) as pension contributions. The sum total of the awards to the Respondent came to K618,242,181.14 (K618,242.20). He then deducted the sum of K48,734,223.59 (K48,734.22) which had been paid to the Respondent leaving the balance of K569,507,957.55 (K569,508.00) to be paid by the Appellant to the Respondent less tax. Dissatisfied with this award, the Appellant appealed to this Court advancing four Grounds of Appeal in the Memorandum of Appeal as follows:- “1. The Deputy Registrar erred in law and in fact by awarding the Respondent the sum of ZMK68,148,788.00 plus ZMK550,098,413.14 against the weight of evidence; 2. The Deputy Registrar erred in law and in fact by not addressing himself to the principles of the Zambia State Insurance Corporation Limited Pension Scheme in relation to J4 an employee’s attainment of retirement age and the mode of calculating pension benefits; 3. 4. The Deputy Registrar erred in law and fact when he held that the mode of calculating the pension benefits was according to the Respondent’s formula of splitting the “Plaintiffs own contributions” and “Company contributions”, and The Deputy Registrar erred in law and fact when he ruled that the basis for calculating the retirement benefits was by taking into account the employee’s and employer’s contributions and that the calculations of the retirement benefits should include 4 months.” In supporting this Appeal, the learned Counsel for the Appellant, Mr. Theo, relied on the arguments in the Appellant’s Heads of Argument. Although four Grounds of Appeal were raised, for the reasons that we shall give hereunder, we shall deal with the 4 Grounds together. The thrust of the Appellant’s arguments is that the learned Deputy Registrar erred in law and in fact when he awarded the Respondent the sums of K68,143,768.00 (K68,143.77) and K550,098,413.14 (K550,098.41) to the Respondent. It was argued that this was against the weight of the evidence on record. Further, that the learned Deputy Registrar also erred in law and fact when he ruled that the basis for calculating the retirement benefits was by taking into account the employee’s and employer’s contributions. And by also stating that the calculations of the retirement benefits should include 4 months. J5 It was contended that the evidence on record, which the learned Deputy Registrar ignored, shows that the Respondent received his normal pension value for both remitted contributions and unremitted contributions. And that the total package the Respondent got from the Appellant including pension under the Pension Scheme is KI 10,000,000.00 (KI 10,000.00) as his salary at the time of retirement was K680,000.00 (K680.00) per month. That the sum of K10,460,203.00, (K10,460.20) that the Respondent received included the cash value of the remitted pensions and the sum of K54,848,908.52 (K54,848.91) as unremitted pensions value calculated by the Pension Fund Manager in accordance with the Pension Scheme rules. It was further submitted that however, the learned Deputy Registrar chose to believe the Respondent’s claims and awarded him the sum of K68,143,768.00 (K68,143.77) as gratuity contraiy to the Conditions of Service applicable to him which only provide for the retirement benefits to be payable at the rate of 3 months’ salary for each completed year of service. That the Respondent had worked for 30 years and 4 months for which he was paid gratuity for 30 years only as there was no provision for payment of gratuity J6 on a pro-rata basis to cater for the 4 months. To buttress this argument, the Appellant relied on the case of Rodgers Chama Ponde and Others vs Zambia State Insurance Corporation Limited1. In support of Grounds 2 and 3 of this Appeal, it was submitted that the pension benefits were calculated at the Respondent’s last drawn monthly salary of K680,000.00 (K680.00) and not on an annualized basis as computed by the learned Deputy Registrar. It was pointed out that the Deputy Registrar ignored the pension principles under the ZSIC Pension Scheme rules such as cost factor, commutation factor, and reducing factors as he simply took the figures computed by the Respondent and awarded them as benefits due to him as evidenced at Page 77 of the Record of Appeal. That the Respondent asked to be awarded the sum of K192,690,240.61 (K192,690.24) which he described as “unremitted pension own contributions” to the pension scheme and also the sum of K452,880,000.00 (K452,880.00) as unremitted pension contributions by the Appellant, which the Deputy Registrar granted. It was pointed out that these figures were not supported by the J7 conditions of service and were extravagant for an employee whose monthly salary was K680,000.00 (K680.00). To augment the above contention, the case of Maamba Collieries Limited vs. Douglous Siakalonga and Others2 was quoted in which it was stated that:- “Unless the conditions of service provide for what is due to the employee no other terms and conditions will be inferred when it comes to determining what is due to the employee.” Further, that in Development Bank of Zambia vs. Dominic Mambo3, this Court held that:- “The Plaintiff cannot seek to benefit from conditions of service that were not known and applicable to him.” In summing up, it was submitted that the Respondent had already received the pension and gratuity which was due to him, hence, the awards by the learned Deputy Registrar must be set aside. On the other hand, in opposing this Appeal, the learned Counsel for the Respondent, Mr. Chimembe, also relied on the Respondent’s Heads of Argument. Counsel only responded to Grounds 1, 2 and 3 of this Appeal which were argued together. It was submitted that the Respondent’s retirement benefits were made J8 up of two parts. The first part being the money the Appellant had to pay to the Respondent consisting of long service gratuity, leave days commutation, repatriation and unremitted pension. The second part being, pension contributions from the Pension Scheme managed by ZSIC Limited as both the Respondent and the Appellant contributed to the Scheme for the benefit of the Respondent. It was pointed out that the Respondent retired normally upon reaching the age of 55 and by which time he had worked for 30 years and 4 months and not just 30 years. Further, that in calculating the Respondent’s terminal benefits, the learned Deputy Registrar was guided by Clause 10.1.2 of the Appellant’s Conditions of Service. It was submitted that the second formula was for calculating the benefits under the ZSIC Pension Scheme which is based on the number of years the employee had been a contributing member from date of joining to date of retirement. And that upon reaching retirement age, ZSIC has to calculate the terminal benefits due. J9 It was contended that there should be no dispute on the sums the learned Deputy Registrar awarded to the Respondent as underpayments or refunds resulting from the change in salaries on 1st July, 2001 from the old salary to the new increased salary. Therefore, that the learned Deputy Registrar found that under the first part of the claim, the Respondent was entitled to long service gratuity; leave days commutation; repatriation; salary underpayments; medical allowance non-payment and housing allowance refunds totaling K68,143,760.00 (K68,143.76). Further, that on the second part of the claim, the learned Deputy Registrar observed that:- “The information pertaining to the Plaintiff and the inputs (data) for the Zambia State Insurance Corporation Pension scheme formula has been well established and the Court has seen that there is no dispute in that area.” It was further submitted that by applying the ZSIC Pension Scheme formula, the learned Deputy Registrar was on firm ground when he calculated the Respondent’s own contribution at K97,218,413.14 (K97,218.41) and the Appellant’s contributions at K452,880,000.00 (K452,880.00). That the learned Deputy Registrar then came to the conclusion that:- J10 “Adding the two figures calculated above gives the true amounts which were due to the Plaintiff at the time of retirement. Since the Defendant agreed to take responsibility and make good the loss suffered for non-remission of the contributions to the Zambia State Insurance Corporation Pension-scheme, it is therefore ordered that the Defendant would pay the money found due. The amount found due by this Court from the Zambia State Insurance Corporation Pension-scheme is K550,098,413.14. This amount is gross therefore subject to Zambia Revenue Authority taxation.” It was submitted that the sum of K48,734,223.59 (K48,734.22) already paid would be deducted from the amount due and awarded to the Respondent. Therefore, that the award by the Deputy Registrar of K550,098,413.00 (K550,098.41) was based on the last remitted contribution of 30th August, 1995 and not on the last salary of 31st December, 2001 which would have translated into a higher amount. Counsel further pointed out that the real problem in paying the correct pension due to the Respondent is the Appellant’s default in remitting to the Pension Scheme. And that the document at page 70 of the Record of Appeal is a mere quotation, hence, it cannot be a basis upon which it can be claimed that the Respondent was paid the sum of K48,000,000.00 (K48,000.00) by ZSIC. Further, that there is no documentary evidence that shows that the Respondent was paid a full pension upon reaching retirement age of 55 years. JI 1 It was argued that the cases of Maamba Collieries Ltd vs. Douglas Siakalonga and Others2 and Development Bank of Zambia vs. Dominic Mambo3 relied upon by the Appellant do not apply to the current case as the Respondent is only seeking benefits accrued to him under the conditions of service that were known and applicable to him. We have seriously considered this Appeal together with the Heads of Argument filed by the respective parties as well as authorities cited. We have also considered the Ruling by the learned Deputy Registrar in this matter. This Appeal raises the question whether or not the learned Deputy Registrar was on firm ground when he awarded the sums of K68,143,768.00 (K68,143.77) and K550,098,413.14 (K550,098.41) as long service gratuity, underpayment of salary, non-payment of medical and housing allowances and as pension benefits under the ZSIC Pension Scheme, respectively. The learned Deputy Registrar accepted the Respondent’s evidence that he was underpaid in his retirement benefits by the Appellant and that he had also been underpaid under the ZSIC Pension Scheme to which he had been contributing. The learned J12 Deputy Registrar further found that the Appellant had not been remitting the pension contributions to ZSIC under the Pension Scheme. The Appellant has however, challenged the Deputy Registrar’s assessment of K68,143,768.00 (K68,143.77) as retirement benefits due to the Respondent and also the award of K550,098,413.14 (K550,098.41) as pension due to the Respondent under the ZSIC Pension Scheme. The Appellant nevertheless, conceded that it had not been remitting some pension contributions to ZSIC. With respect to the question whether the Respondent was entitled to the sum awarded as retirement benefits from the Appellant, Clause 10.1.2 of the Conditions of Service under which the Respondent was serving provides that:- “10.1.2 The retirement benefit shall be paid at the rate of three months salaries for each completed year of service, plus Pension Scheme benefits if the employee was a member of the scheme.” In the current case, there is no dispute that the Respondent worked for the Appellant for a period of 30 years and 4 months upon which he retired on reaching the age of 55 years. However, the record shows that the learned Deputy Registrar, in assessing J13 what was due to the Respondent from the Appellant as retirement benefits, awarded 3 months’ salaries for each year completed plus 4 months. In accordance with Clause 10.1.2 recast above, the Respondent’s Conditions of Service provided for 3 months’ salaries for each year of service completed. The above Clause does not at all allow for pro-rata payment. In the case of Rodgers Chama Ponde and Others vs Zambia State Insurance Corporation Limited1, we held that:- “For gratuity to be paid on a pro-rata basis the provision should read...long service gratuity shall be payable only for those number of years or parts thereof.” We, find no provision in the Respondent’s Conditions of Service for pro-rata payment. It is also our considered view that the learned Deputy Registrar misdirected himself by basing the calculation of the Respondent’s benefits on the Respondent’s annualised salary instead of his monthly salary. This is clearly contrary to Clause 10.1.2 of the Respondent’s Conditions of Service which provided for 3 months’ salaries for each completed year of service. The 3 months’ salary for each completed year of service should also have J14 been based on the last monthly salary drawn by the Appellant and not what he was earning annually. Therefore, the award of the sum of K68,143,768.00 (K68,143.77) which was based on 3 months’ salary plus 4 months as well as on an annualized salary is set aside. With respect to what the Respondent was entitled to under the ZSIC Pension Scheme, Clause 10.1.2 of the Respondent’s Conditions of Service recast above states that in addition to the retirement benefits from the Appellant, the Respondent was also entitled to pension benefits under the ZSIC Pension Scheme to which he had been contributing. In awarding the sum of K550,098,413.14 (K550,098.41) under the ZSIC Pension Scheme, the learned Deputy Registrar stated as follows “Adding the two figures calculated above (K97,218,413.14 being Respondent’s contributions and K452,880,000.00 as Appellant’s contributions to ZSIC Pension Scheme) gives the true amounts which were due to the Plaintiff at the time of his retirement. Since the Defendant agreed to take responsibility and make good the loss suffered for non-remission of the contributions to ZSIC Pension- Scheme it is therefore ordered that Defendant would pay the money found due. The amount found due by this court from ZSIC Pension- Scheme is K550,098,413.14. This amount is gross therefore subject to ZRA taxation.” (emphasis ours). JI5 As can be seen from the above, the learned Deputy Registrar applied the formula of splitting the Appellant’s contributions and that of the Respondent in coming up with the sum in question. We agree with the Appellant’s contention that by applying the formula of splitting the contributions, the learned Deputy Registrar erred as what he ought to have done is a one off calculation as guided by the quotation at page 70 of the Record of Appeal given by the Pension Scheme Manager. Although the Respondent argued that the Appellant created the problem by not remitting some of the contributions to the Pension Scheme Manager and that this was contrary to the Pension Scheme rules, it is apparent that the Deputy Registrar did not do justice to this matter as he applied a wrong formula. For the reasons stated above, we uphold all the four Grounds of Appeal. We order and direct that the record be referred back for re-assessment of the sum(s) due to the Respondent if any pursuant to Clause 10.1.2 of the Respondent’s Conditions of Service before a different Deputy Registrar. We also order that the sum(s) that have so far been paid to the Respondent should be deducted from the sum(s) if any, that will be awarded at assessment. We further direct J16 and order that the calculations of the benefits due under the Pension Scheme be done as though the Appellant had been remitting the contributions timely and continuously from the date the Respondent joined the Scheme up to the date when the Respondent retired. In the circumstances of this case, we order that each party bears its own costs of this Appeal. (Rtd) D. K. Chirwa SUPREME COURT JUDGE H. Chibomba SUPREME COURT JUDGE SUPREME COURT JUDGE