Unyibi Musuiluko and Anor v Zambia State Insurance Co-operation Ltd (Appeal 58 of 1999) [2000] ZMSC 113 (20 June 2000)

IN THE SUPREME COURT FOR ZAMBIA HOLDEN AT LUSAKA APPEAL NO. 58 OF 1999 (Civil Jurisdiction) BETWEEN: UNYIBI MUSUILUKO AND 4 OTHERS APPELLANTS AND KARIBA NORTH BANK LIMITED 1ST APPELLANT AND ZAMBIA STATE INSURANCE CORPORATION LIMITED 2nd RESPONDENT CORAM: NGULUBE, CJ, SAKALA AND CHIRWA, JJS. On 21st March and 20th June, 2000 For appellants - F. H. M. Hamakando, of Batoka Chambers For 1st respondent - H. Silweya, of Silweya and Company For 2nd respondent - M. Mundashi, of Mulenga, Mundashi and Company JUDGMENT Ngulube, CJ, delivered the judgment of the court. The appellants were employed by the first respondent after transferring from the service of ZESCO Limited which service the new I i I employers agreed with the Union to regard as continuous service in reckoning their lengths of service. The appellants were unionized employees who worked under inter alia a collective agreement. They were also members of a pension scheme administered by the second respondent. The agreement provided for normal retirement under Clause 15, early retirement under Clause 16 and retirement benefits under Clause 17. These clauses read:- “15. RETIREMENT a) b) c) The normal retirement age shall be 55 years for both men and women or 20 years of continuous service. Notice — An employee due to retirement shall be notified in writing at least six months in advance. An employee may apply for extension of employment up to a maximum of ten years. At the end of such contract of employment, the employee shall be entitled to gratuity of 25% of the gross taxable emoluments. 16. EARLY RETIREMENT a) b) Some employees age more rapidly than others and before reaching retirement age are unable to perform their duties competently. In that event, Management may retire the employee early. An employee may apply for early retirement after serving the Company for ten years. 17. RETIREMENT BENEFITS In addition to the benefits accruing from the Pension Scheme an employee who retires as stipulated in Section 15 and 16 has served for the first ten years shall be granted retirement benefits of sixteen (16) months basic salary plus one month ’s pay for every completed year of service with the Company and shall be entitled to repatriation benefits in accordance with Section 29 of these conditions of service. ” The pension fund was governed by its own rules which it transpired were at variance with the retirement provisions under the collective agreement in that under the pension fund rules normal pensionable age was sixty years for males and fifty-five years for females. In contrast, the collective agreement put the pensionable age at fifty-five years all round plus a length of service qualification which was put at twenty years of continuous service. By an identical letter dated 1st October, 1993, each of the appellants received notice of retirement which was couched in the following terms:- “Dear Sir, NOTICE OF RETIREMENT AND 20 YEARS LONG SERVICE BONUS AWARD: This serves to advise that you have been given a six (06) months notice of retirement effective from 1st October 1993. Your last working day will therefore, be 31st March 1994. This notice is in compliance with Clause 15 (a) and (b) of the revised Unionized Terms and Conditions of Service effective from 1st January 1993. However, it was due to an administrative oversight that the six (06) months notice of retirement was not intimated to you on the 1st July 1993 as you will be clocking twenty (20) years of continuous service on 1st December 1973 (71993) because in March 1992, Management approved consideration of your service in ZESCO from Ist I December 1973 to 14th July 1976 prior to the formation of Kariba North Bank Company Limited. Therefore, you will be entitled to the following benefits:- 1. 2. Pension. Retirement Benefits as follows:- a) b) Two (02) months basic salary for every completed year of service for I - 10 years. Three (03) months basic salary for every completed year of service for 11 - 20 years. 3. 4. 5. Accrued leave days, if any. Repatriation Benefits. National Provident Fund Contributions. In addition, you will also be entitled to a Long Service Bonus that include the following:- a) b) c) d) e) f) g) Plough Planter Ridger Two Oxen Chain 100 Kg Top Dressing Fertilizer 100 Kg Basal Dressing Fertilizer However, in accordance with Clause 15 (c) you may apply for extension of employment up to a maximum of ten years and the approval will be subject to Management’s discretion. We thank you very much for the valuable services you have rendered to the company for a continuous period of 21 years; and please accept our congratulations. By copy of this letter, the Chief Accountant (G and T) ZESCO Lusaka and Financial Controller KNBC Head Office - Lusaka are advised to make necessary arrangements to pay you the above Retirement Benefits and Long Service Bonus respectively by 31st March, 1994. Yours faithfully, KARIBA NORTH BANK CO. LTD (Signed) MKHONDOWE PERSONNEL OFFICER” The Pension Fund Managers refused to pay the pension benefits on the ground that the retirees were under age. Instead, the appellants only got a refund of their own contributions without even the contribution of the employers. The appellants were not paid the sixteen months’ basic pay stipulated under Clause 17; instead, they were paid under Clause 16 which related to early retirement by persons who were aging prematurely. Aggrieved by this turn of events, the appellants launched proceedings in the High Court. In the main judgment after trial, the learned trial Commissioner adjudged that the appellants were not entitled to the employer’s contributions under the pension scheme because they had not reached the pensionable age of sixty years. He found that although the failure by the employer to harmonize the conditions of service with the pension rules on the point was morally reprehensible, there could be no legal liability. The learned trial Commissioner however did accede to the appellants’ contention that they were wrongly retired on length of service after the employers wrongfully carried forward their service with ZESCO when the affected workers had not consented to their employment being transferred to new employers, or being treated as being on such transfer. For this conclusion, Section 35 (1) of the Employment Act (CAP. 512 at the time, now CAP. 268 (1995 edition) was called in aid. This is the section that disallows non- consensual transfers. The court concluded that the first respondent had no authority to consider the plaintiffs’ period of service with ZESCO and had accordingly wrongfully retired the plaintiffs from their employment. For this breach, it was adjudged that the measure of damages would be salary for six months in lieu of notice, citing Clause 15 (b) as the relevant condition. We can immediately point out that the court below confused the six months notice to be given as notification of an impending retirement with ordinary notice of termination which in the instant case could have been available under Clause 13 which was never under discussion at all and under which there might even have been a payment in lieu of notice. As it turned out, Mr. Silweya persisted in this mistaken approach which was used as the basis for an application for review which the learned trial Commissioner entertained. As a result, he ruled that the appellants had been given appropriate notice of six months so that the termination was not wrongful or unlawful; that it was lawful since termination by notice was one of the lawful ways of terminating a contract of employment. The court reversed the award of damages. The effect of this was that the plaintiffs got absolutely nothing out of the litigation despite the finding that a termination based on early retirement was actually wrongful because they had not served for twenty or more years and there were no facts to support early retirement within the relevant clause. It was also plain that the retirement upon notice actually given was based on the clearest mistake of fact as the typical letter written to the appellants which we have quoted plainly discloses. There was a lot of merit and force in the appellants’ grounds of appeal which raised all the foregoing points. As the saying goes in common jargon, the employers “misfired” in purporting to early retire the appellants with full benefits when these would in fact not be forthcoming. Mr. Hamakando was on firm ground when he submitted that the learned trial Commissioner had misdirected himself when he ignored the type of termination intended and disclosed in the letters written to the appellants and when he transformed the termination to be one upon notice in the ordinary way. Mr. Silweya attempted to exonerate the employers and to lay the blame for the lapse over the pension benefits at the appellants’ door. Ultimately, he was constrained to admit that the employers were under the impression that the workers could retire either on age or on service of not less than twenty years when in actual fact this was at variance with the rules of the pension scheme. On behalf of the second respondents, Mr. Mundashi relied entirely upon the rules of the pension scheme and submitted that any sanctions in this matter should be visited only upon the employers who had misled their workers into believing that they would be paid. We were called upon to order that the first respondent do pay the appellants not only the admitted unpaid repatriation money but also the equivalent of due pension. From what we have been discussing, it is clear that we consider the court below to have erred and misdirected itself. We reverse the judgment below and enter judgment for the appellants. The appellants were clearly due the Clause 17 benefits (see page 40 of the record and the restatement of the same at Clause “D” at page 51 of the record). These we award to them less any payment already made under clause 16. The repatriation benefits were not even in dispute and these we award to the appellants. The letters written by the employers promised a pension which was not satisfied by the mere refund of the employees’ contribution. This was a real loss and it appears to us that the workers should be compensated by damages to be assessed by the Deputy Registrar equal to the benefits that would have been payable under the pension scheme had it matured; such damages are to be paid by the employer. In the event that the computation of such damages proves to be problematic, the appellants are given liberty at their option to have recourse to the provisions of Statutory Instrument No. 99 of 1994 which would seem to adequately cover this type of situation. In sum we hold and adjudge that the ruling of the court below was erroneous in holding that the first respondent could and did lawfully terminate the employment upon notice under the clause cited when the employers could only give six months’ notice to an employee due to retirement, that is to say, ripe for retirement. The attempt to early retire the appellants amounted to a breach which should be compensated in manner we have already indicated. The appeal is allowed; judgment is entered for the appellants, with costs to be taxed if not agreed. M. M. S. W. NGUpJBE CHIEF JUSTICE E. L. SAKALA SUPREME COURT JUDGE D. K. CHIRWA SUPREME COURT JUDGE