Workcom Pension Registered Trustees and Anor v Musana (SCZ 107 of 2002) [2003] ZMSC 127 (3 June 2003)

IN THE SUPREME COURT OF ZAMBIA HOLDEN AT NDOLA (CIVIL JURISDICTION) SCZ APPEAL NO. 107/2002 1ST APPELLANT WORKCOM PENSION REGISTERED TRUSTEES WORKERS COMPENSATION FUND CONTROL BOARD 2ND PPELLANT AND DAVEY MUSANA RESPONDENT CORAM: Sakala, C. J., Mambilima and Chitengi JJS 3rd December, 2003 and 3rd June, 2003 For the Appellants: For the Respondent: Mr. M. Chitabo of Chitabo Chiinga Associates. Mrs. J. K. Kabuka of Kabuka and Company. _____________________ JUDGMENT___________ ,_______ Sakala, C. J., delivered the Judgment of the Court. Cases referred to: 1. Bruner Vs Moore (1904) 1 Ch 305 2. Hughes Vs Metropolitan RL Y(1877) A. C.439, 448. 3. Gordon Derby VScottish Equitable PLC (2000) 3 ALL. E. R 793 For convenience, the 1st and 2nd Appellants will be referred to as the 1st and 2nd Plaintiffs and the Respondent will be referred to as the Defendant which designations they were at the trial. This is an appeal from a Judgment of the High Court dismissing the Plaintiffs' claim with costs and entering judgment in favour of the Defendant, The undisputed facts were straight forward. The Defendant worked for the 2lld Plaintiff for a long time rising to the post of Commissioner. During the period of his employment with the 2nd Plaintiff, he was a contributor to a Pension Scheme run by the first Plaintiff up to 31st March 2000 when he was paid his pension benefits in the sum of K329,768,148:35ng. According to the Pension Scheme Rules, the Defendant's normal pension date was 1st November,1998 and not 31st March, 2000. He should then have been paid his pension benefits calculated at the salary as at 30th November, 1998. But he was not paid his pension benefits on that date because he had been offered a contract of employment which was to expire on 30th September, 2000. According to the Pension Scheme Rules, where a member remained in employment after attaining the retirement age of 55 years, he had a choice to receive his pension as if he left at normal retirement date; or to postpone his pension not later than when he leaves. Where the pension has been postponed, a member is not required to pay any further contributions to the Scheme. But in the case of the Defendant, he continued to pay the pension contributions to the scheme. The Plaintiffs continued to receive and accept the contributions so paid. On 30th March, 2000, when the Defendant was paid his pension benefits, the salary used to calculate his benefits was his salary as at 30th March, 2000 and not as at 1st November 1998. As a consequence of basing the calculations on the salary as at 30th March 2000, the Defendant was paid a sum of K264, 878,483:36ng more than he would have been paid if his benefits had been calculated at the salary of 1st November, 1998. Documentary evidence on record shows that upon the discover/ of the over payment, the Plaintiffs wrote the Defendant requesting him to indicate how he intended to pay back this over payment to the Pension Scheme. But the Defendant requested the Plaintiffs to ratify his Membership with the Pension Scheme as having ended on the date he made the last contribution to the Scheme. On the 14th of December, 2000, the Plaintiffs launched these proceedings claiming the over payment in the sum of K264,878,483:36ng as money erroneously paid to the Defendant. The learned trial judge considered the undisputed facts and reviewed the evidence. He identified the issue for determination as being whether there was in fact a mistake in the payment of the money that vitiated the contract so that the payment of the Defendant's pension benefits was void ab initio. The court found that there was no mistake of the facts or terms of the contract on either party because the Defendant was allowed to continue to pay his contributions to knowledge of the facts does an act in consistent with avoidance, as for example, where he accepts premiums or renews the contract. Other authorities were also cited. The court observed that in the present case, when the Defendant was allowed to continue making contributions and the Plaintiffs continued to receive such contributions, they led him to believe that at the end of the day, when his pension benefits are calculated, it would be under the current salary and not on the salary when he attained his retirement age. This, according to the court, was confirmed when the Defendant's pension benefits were infact calculated according to his current salary when he was paid his pension benefits. The court pointed out that in doing so, the Plaintiffs waived the terms of the contract which required the Defendant to stop paying contributions to the Pension Scheme when he attained retirement age in 1998. The court held that the Plaintiffs were not entitled to rely and not to be allowed to enforce the contract based on the rules or terms which they waived and made the Defendant believe that his pension benefits would not be calculated according to his October, 1998 salary but on his salary at the date of payment. The Plaintiffs' claim failed. Three related grounds of appeal were argued before us namely; that the learned trial judge erred in law by resolving the matter against the weight of the evidence on record and without due consideration of the relevant clauses in the first Plaintiff's Pension Scheme Rules; that the court below misdirected itself both in law and on the facts when it found that the Defendant was not over paid; and that if, which is denied, the Plaintiffs were liable to pay an enhanced pension, the court below applied wrong principles in awarding the entire overpaid amount of K264,878,483:36 as the amount due. In support of these grounds, we received written heads of argument supplemented by detailed oral submissions on the first ground by Mrs. Kabuka on behalf of the Plaintiffs. The written and oral arguments and submissions on the first ground were that the learned Judge misapprehended the facts upon which he based his finding on pension benefits payable to the Defendant without due regard to the applicable Pension Scheme Rules. That according to the Rules, a member is entitled to "Final Pensionable Salary" defined to mean the highest annual salary paid to a member in the five years immediately preceding his normal pension date; that the measure of a member's pension benefits is indexed to that member's earnings immediately prior to his normal pension date defined in the rules to mean the first day of the Calendar month immediately following the fifty fifth birth day of a member. Mrs. Kabuka pointed out that evidence adduced in court established that the Defendant was born on 20th October, 1943 and reached his "Normal Pension Date" on 1st November, 1998. It was argued that in the premises, the Defendant's "final pensionable salary" for the purpose of calculating his benefits as stipulated in the Rules was the highest annual salary earned by him immediately preceding his said "Normal Pension Date" namely; 1st November, 1998 and not the salary earned in March, 2000, contrary to the trial Judges' finding. Mrs. Kabuka pointed out that the situation here was one of mistake as considered in the case of Gordon Derby Vs Scottish Equitable PLC(3). She submitted that a finding of a waiver was contrary to the evidence; contending that the quarrel in the instant case was as to the rate or formula used to calculate the Defendant's pension benefits. She submitted that the correct formula was that as defined in the Rules for a member who attained the age of 55 years. Counsel pointed out that according to the Rules, the Defendant having deferred payment at 55 years, he was entitled to an enhanced formula at the next salary at the age of 55; years but in the instant case, they used the exit salary at the age of 60 years to calculate the pension benefits which distorted the entitlement. Counsel further pointed out that the mistake was made at the calculation of the Defendant's pension benefits which mistake was conceded by the Defendant by acknowledging that he needed authority of the Board to be entitled to the overpayment. In his short written and oral responses to arguments in ground one, Mr. Chitabo, on behalf of the Defendant, contended that the court was on firm ground when it held that when the Defendant was paid his benefits on 30th March, 2000, the salary used to calculate his benefits was his salary as at the above date as this was known to both parties and strictly in accordance with the Rules. According to Mr. Chitabo, the final pensionable salary was one that was applicable on the date the Defendant was retired from contributing to the scheme on 31st March, 2000. Counsel submitted that by continuing to deduct, remit and receive the Defendant's contributions until the 31st of March 2000, the Plaintiffs had allowed for the length of the contribution period. He submitted that there was no mistake in the instant case as the contributions and the acceptance of the contributions constituted a waiver. According to Mr. Chitabo, the contributed benefits became an accrued right that could not be taken away. Both learned counsel cited some authorities in support of their submissions on ground one. We have examined the judgment of the court below and considered the arguments and submissions on ground one. This appeal succeeds or fails depending on the views we take on the arguments and submissions on ground one. This ground centers on the interpretation of the Plaintiffs' Pension Scheme Rules. The salient facts of the case, as already alluded to, are not in dispute. The arguments and submissions in ground one criticize and attack the trial Judge's finding where he stated "(f) When the Defendant was paid his pension benefits on 30^ March, 2000 the salary used to calculate his benefits was his salary as at the above date. This was again known to both parties and strictly speaking this was in accordance with the Rules." The case of the Plaintiffs as pleaded was that the Defendant chose to postpone his pension to a date later because he continued working but that the pension payable was to be based on his salary as at the "Normal Retirement Date/' Paragraphs 7 and 8 of the statement of claim read as follows:- "7. The Defendant chose to receive 50% commutation of his pension in March 2000 and at that time, the 1st Plaintiff inadvertently computed and paid through the 2* Plaintiff the Defendant's said pension based on his salary at the date of payment. 8. As a consequence, the Defendant was overpaid the sum of K264,878,483:36 which sum he has neglected and or refused without just cause to pay back to the 1st Plaintiff." Paragraph 6 of the Defence reads:- "6. The Defendant admits receiving 50% commutation of his pension and states that the same was properly and rightly computed and was supported by internal audit department. Accordingly the Defendant denies that he was overpaid in the sum of K264,878,483:36 as alleged in paragraph 8 of the Statement of Claim." Our understanding of the pleadings is that the Plaintiffs are contending that they unintentionally, wrongly or improperly computed the Defendant's pension benefits based on his salary as at the date of payment instead of his salary at the normal retirement date. In other words, the Plaintiffs were pleading mistake. The Defendant denies any improper or wrong computation of his pension and denies any overpayment. The Defendant never pleaded waiver in his defence. In any event, we must assume that the Defendant, as Chief Executive of the 2nd Plaintiff, must have known the Pension Scheme Rules. The fact that the Defendant was paid his pension benefits as at 30th March, 2000 calculated on the basis of the salary as at that date was common cause. Indeed, had the computation of the pension benefits been based at a salary as at 1st November, 1998, he would have been paid less; hence, the claim for over payment. The question that arises for determination as we see it, on the facts not in dispute, is whether the calculation of the Defendant's pension benefits on 30th March, 2000, was within the Plaintiff's Pension Scheme Rules? Put differently:- Was a correct formula used in computing the Defendant's pension benefits? The normal pension retirement date for the defendant was 30th November, 1998. The Pension Scheme Rules define "Normal Pension Date" to mean the first day of the Calendar month immediately following the fifty-fifth (55) birthday of a member. It was common cause that for the Defendant, the "Normal Pension Date" was 1st November, 1998. The Rules also stipulate the applicable salary for purposes of calculating a member's pension benefits namely; "Final Pensionable Salary" defined as the highest annual salary paid to a member in the five years immediately preceding his normal pension date. The contention on behalf of the Plaintiffs is that a wrong formula was used by applying the Defendant's salary as at 30th March, 2000, when the Defendant stopped his contributions. It was submitted that the finding of a waiver was a misdirection. On the facts not in dispute, we are satisfied that the issue was not one of waiver. Equally, the continued contributions to the scheme by .the Defendant and the receipt of the same by the Plaintiffs was not in issue. The issue was one of the formula that was to be used, in terms of the Rules, to calculate the Defendant's pension benefits. We are satisfied that on the facts not in dispute, a wrong formula based on salary as at 30th March, 2000, a formula contrary to the Pension Scheme Rules, was used to calculate the Defendant's terminal benefits, hence the overpayment. The learned trial Judges findings were all based on waiver; but the defence of waiver was never pleaded. On the facts, we are satisfied that the over payment was made in error. Ground one of appeal therefore succeeds. The discussions in ground one, pertaining to terms of the applicable Pension Scheme Rules, take care of grounds two and three relating to findings that the Defendant was not over paid and awarding the Defendant of the entire over payment contrary to the Pension Scheme Rules on late retirement. We find it unnecessary to delve into these two grounds. In the result, the whole appeal succeeds with costs to be taxed in default of agreement. E. L. Sakala CHIEF JUSTICE b - — I. C. Mambilima SUPREME COURT JUDGE P. CHItengi V SUPREME COURT JUDGE I I