BP Zambia PLC v Chipalo (Appeal 14 of 2011) [2014] ZMSC 21 (25 February 2014)

(274) IN THE SUPREME COURT OF ZAMBIA HOLDEN AT LUSAKA (Civil Jurisdiction) SCZ JUDGMENT NO. 12 OF 2014 APPEAL NO. 14 OF 2011 B E T W E E N: BP ZAMBIA PLC AND EXPENDITO CHIPASHA CHIPALO (Suing on his own behalf and on behalf of 235 Others) APPELLANT RESPONDENT CORAM: MUMBA, AG. DCJ, WANKI AND MUYOVWE, JJS On 17th April, 2012 and 26th February, 2014 For the Appellant: Mr. A. J. Shonga of Messrs. Shamwana and Company For the Respondent: Mr. F. Chishimba of Messrs. Frazer and Associates ___________________________________________________________________________ J U D G M E N T ___________________________________________________________________________ WANKI, JS, delivered the Judgment of the Court. CASES REFERRED TO: 1. 2. 3. Raphael Mwale and Ruth Phiri -Vs- BP Zambia Limited Appeal No. 16 of 1999. Raphael Mwale and Ruth Phiri -Vs- BP Zambia Limited Appeal No. 109A of 2002. BP Zambia PLC -Vs- Yuyi Mubita Lishomwa, Hastings O’Brien Gondwe, Singumbe Keith Mutupo and Mike Kabwe Appeal No. 72 of 2007. 4. Union Bank (Zambia) Limited -Vs- Southern Province Co- operative Marketing Union (1995-1997) ZR 207. 5. Gertrude Munyosi, Attorney General -Vs- Catherine Ngalabeka, (1999) ZR 117. (275) This is an appeal against the judgment of the High Court given at Lusaka on 18th day of October, 2010 entering judgment in favour of the respondents and ordering that the whole matter be treated on the basis of the Rules that applied to each one of them at the time of separation. By an amended Writ of Summons filed in the Principal Registry the respondents claimed against the appellant, the sum of K18,215,314,116.00; being accrued value of pension from their membership of the BP Zambia Pension Scheme; damages or equitable compensation for negligence leading to loss of the respondents’ pension benefits; an account of the sum of K720,056,600.43 paid out of the Pension Scheme Fund to the appellant by the Zambia State Insurance Corporation Limited on or about 31st January, 1995 and interest. The respondents relied on the evidence of five witnesses in support of their claim. PW1 was Expendito Chipasha Chipalo. His evidence was that he was employed by the respondent for 11 years on permanent and pensionable Conditions of Service and he J2 (276) contributed to the respondent’s Pension Scheme until the 28th of February, 1993 when he was retrenched from employment and paid a retrenchment package but without a pension. According to PW1 the respondent operated the BP Zambia Staff Pension Scheme to which members of Staff aged between 20 and 50 years receiving a minimum salary of K1,000 per annum at the time qualified. The evidence of PW1 was further that for one to qualify for a benefit out of the Scheme, he or she was required to serve for 60 continuous months or five years in which monthly contributions to the Scheme were made. The defined benefits were:- 1. 2. 3. A deferred pension payable at the age of 55 years; A transfer value if one left the employer to join another employer with a deferred Pension Scheme; A refund of any pension contributions with compound interest if one left the Scheme before completing five years or 60 months in employment. According to PW1, an employee could only lose those benefits if that employee was dismissed from employment for a J3 serious offence. He also told the Court that the Scheme was a contributory Scheme in which the employees contributed 7 and (277) half percent of their monthly salaries while the employer contributed 5% of each employee’s monthly salary. PW1’s further evidence was that at the time of his retrenchment, he was notified by letter that he would forfeit his pension benefits in lieu of the retirement package to which he did not agree. He and other employees similarly affected engaged the appellant in negotiations until in the year 2000 when he was refunded his own pension contributions without interest. PW1 rejected that refund on grounds that the appellant’s Pension Rules clearly stated what his benefits should have been. He also told the Court below that the appellant’s local Pension Managers were the Zambia State Insurance Corporation (ZSIC), Saturnia Regina Trust Fund and Madison Insurance Company Limited. According to PW1, the root cause of the problem was what he termed the huge fraud whereby the appellant was deducting the employees’ contributions but failed to remit them to the J4 Fund Manager and further failed to remit the employer’s contributions to cover the monthly contributions as well as the accrued pension rights resulting in a deficit of about K720 million by December, (278) 1993 which rose to about K1.5 billion following an actuarial report from the Zambia State Insurance Corporation. He added that the appellant made an offer which PW1 and the others affected rejected on the grounds that the figures offered did not correspond with the benefits defined under the Pensions Scheme. PW1 also told the lower Court that according to the appellant’s Pension Scheme, his deferred pension at the time of retrenchment was K12 million and the transfer value was K9.5 million while his reduced pension had he chosen to leave the Scheme before attaining the age of 55 years would have been K4.5 million representing 50% of the transfer value. He further said had the appellant remitted all the contributions to the Scheme his pension would have grown to J5 K37 million by July, 2002 but he was only offered K3 million without any formula being explained. According to PW1 the appellant’s failure to remit the pension contributions to the Fund Managers caused a huge loss through lost interest on earnings and compound interest offered by the Scheme. He also said the appellant finally notified him other (279) former employees affected that their money had been moved from Zambia State Insurance Corporation to another Fund Manager; and that the movement of funds was without the joint respondents’ knowledge. PW2 was Isaac Chisala. His evidence was that he was one of the respondents who worked for the appellant from 1981 and was retrenched on 31st March, 1993; that he was a member of the appellant’s Pension Scheme and when he was retrenched, he was only given a retrenchment package and was not allowed to exercise any option under the Staff Pension Scheme. PW3 was Kennedy Watson Phiri. His evidence was that he joined the appellant in 1971 until 1993 when he was retrenched J6 and paid a retrenchment package; and that upon leaving, he was offered two options and he accepted option 2 which involved payment of K8 million which he did receive through the Saturnia Regina Trust Fund. PW4 was Pelaja Chongo Mukuka. His evidence was that he worked for the appellant from October, 1991 to April, 1999 when he was retrenched as Consumer Sales Assistant; that he (280) subscribed to the appellant’s Pension Fund through Saturnia Regina Trust Fund; and that when he was retrenched he was given an option of either getting the retrenchment package or to defer his pension and he opted to receive his own contributions. PW5 was Jimmy Mashinkila, Deputy Director, Life and Pensions at the Zambia State Insurance Corporation Limited (ZISC). His evidence was that he did handle the appellant’s Pension Scheme from its inception from the 1st of November, 1977. He narrated the various salient features of the appellant’s Pension Scheme which included monthly contributions of both employee and the employer options which J7 were remitted to the Zambia State Insurance Corporation Limited. PW5’s further evidence was that he managed the appellant’s Pension Scheme in which the appellant requested for a transfer of the Scheme to another Fund Manager thereby effectively terminating the Fund Management. According to PW5 Zambia State Insurance Corporation on 31st January, 1995 refunded the appellant K720,056,600.43. Before the transfer, the appellant was requested to make good the outstanding contributions which (281) had not been remitted on behalf of the employees. He added that despite the request, the outstanding contributions were never received. The appellant in its amended defence denied the respondent’s claim and in rebuttal the appellant relied on the evidence of one witness. Paul Mwanza was DW1. His evidence was that in 1993 the appellant went through a restructuring process which involved declaring a number of employees redundant; at the time the J8 appellant did not have a retrenchment policy, because of that they approached the company’s Fund Managers, namely, the Zambia State Insurance Corporation who advised that they were not able to meet the cost involved in the retrenchment packages; and that later, the appellant came up with a retrenchment package which was used to effect payments to the affected employees. His further evidence was that in the process of this arrangement two of the appellant’s employees took the issues to the Court after they claimed for pension contributions from the (282) appellant. The dispute between the retrenched employees and the appellant eventually ended up in the Supreme Court which passed judgment in October, 1991 in which it was decided that the plaintiffs were entitled to a refund of their pension contributions. Following that judgment a number of former employees who left in 1993 approached the appellant claiming their pension contributions. After those claims, the appellant in the process of resolving them, the former employees lodged a J9 petition with BP International in London which in turn instructed BP Africa which was the holding company of appellant to investigate and resolve the issue raised in the petition. DW1 further informed the Court below that, thereafter a team was appointed from Head Office and the petitioners were engaged directly and through consultants who analysed the appellant’s pension fund; that an Actuary was engaged to ascertain what was due in terms of pension contributions to each individual affected and a report was submitted to the Chairman of BP Africa, and the next phase was to come up with a payment process. (283) Before this could be done, this matter was once again taken to Court and the appellant could not proceed any further than requesting the Pension Fund Managers to pay what was due to each former employee of the appellant in form of pension contributions and that this payment was made into Court. According to him the figure which the respondents are claiming is not what was calculated after a thorough valuation J10 of the actuary and was far less than what was being claimed by the respondents. Regarding the evidence of PW4, DW1 stated that the witness was retrenched in 1998 and like the rest of those retrenched in 1998 PW4 did not exercise her rights as stipulated in the Saturnia Regina, Pension Rules. He further said that there were two types of respondents amongst the 236 before the Court; the first group, were those retrenched in 1993 when the issue of pension contributions was the subject of the petition and the second was the group which was retrenched in 1998. The Court below after considering the evidence and the submissions adduced before it found that the respondents were (284) treated badly from the date of separation; their entitlements were not calculated and paid in accordance with the rules. In particular the Court below found that each of the respondents was entitled to be paid under Rule 11(ii) after the transfer of their contributions from ZSIC. The Court below therefore entered judgment in the respondents’ favour and ordered that J11 the whole matter be treated on the basis of the Rules that applied to each one of them at the time of separation. The Court below further ordered that any redundancy packages refunded to the appellant must be paid back to those of the respondents affected with penal interest as awarded herein. The Court below also ordered that the total figure arrived at for each respondent shall attract, in addition to the interest prescribed by the Pension Rules, a penal rate of interest at the current average Bank lending rate from the date of the writ until judgment; thereafter at 8% until settlement. In summary, the Court below entered judgment for the respondents as follows:- 1. An account of the true values of the pension contributions for both employee and employer be rendered to each respondent. (285) 2. 3. The values realised should bear a penal interest rate based on the current average Bank lending rate per annum from date of separation to the date of the writ. An account of the transfer value of the K720, 056,600.00 paid to the appellant by the ZSIC as in No. 1 above. J12 The respondents on their part have failed to prove the following:- 1. 2. That the sum of K18,215,314,116.00 was due to them. Damages or equitable compensation for negligence on the ground that this is adequately addressed in the award of penal interest at the current average Bank lending rate. 3. That compound interest was due to them. Dissatisfied with the foregoing findings and orders, the appellant has appealed to this Court. In its Memorandum of Appeal the appellant has advanced three grounds of the appeal as follows:- 1. 2. The learned trial Judge below erred both in law and fact when he held that the appellant should submit an account of the true values of the pension contributions for both the employee and employer to be rendered to each respondent. The learned Judge erred in law and fact when he held that the values realized should bear a penal interest rate based on the current average Bank lending rate per annum from the date of separation to the date of the writ. 3. The learned trial Judge erred in law and fact when he decided that all 235 respondents were entitled to judgment. (286) J13 In support of the foregoing grounds of the appeal, Mr. Shonga, SC filed appellant’s head of arguments on which he wholly relied at appeal hearing. Mr. Shonga proposed to argue grounds one and three of the appeal together and ground two on its own in the heads of argument. In support of grounds one and three State Counsel pointed out that on page 123, the lower Court made the following finding:- “I enter judgment for the plaintiffs as follows:- 1. An account of the values of the pension contributions for both employee and employer be rendered to each plaintiff.” It was submitted that the Court fell in error when it found that the appellant should render an account of the value of the pension contributions for both employee and employer to each of the respondents without considering the totality of the evidence before it. State Counsel contended that the respondents called four witnesses to support their claim and from the evidence (287) J14 before Court, it became very apparent that there were two types of respondents who were claiming different reliefs. Mr. Shonga pointed out that paragraph 3 of the amended Statement of Claim dated 21st January, 2004 stated as follows:- “3. Between the period 1993 and 1999 both periods inclusive the defendant carried out redundancies that effectly terminated the plaintiff’s employment. This statement confirms that the plaintiffs were divided as some were retrenched in 1993 while some were retrenched in 1999.” State Counsel contended that further evidence as will be alluded to, will show that although all the respondents were employees of the appellant, they nonetheless were members of different Pension Funds. It was submitted that although in the amended Statement of Claim all the plaintiffs were members of an occupational contributory pension Scheme called BP Zambia Limited Staff contribution pension Scheme, the testimony of PW4 and the uncontested testimony of DW1 confirm that there were two sets of plaintiffs. It was submitted that the evidence of PW4 a former employee of the appellant who left employment through retrenchment in 1999 was that she subscribed to Saturnia (288) J15 Regina Pension Fund which is different from the BP Zambia Limited Staff Contributory Pension Scheme. This was confirmed in paragraph 3 of the amended defence which provides that:- “3. The content of paragraph 4 of the Statement of Claim are admitted and the defendant will clarify at trial that it was only members who were retrenched earlier than 1999 that were members of the BP Zambia Staff Contributory Pension Scheme. The defendant will aver at trial that those members retrenched during 1999 did not belong to the Saturnia Regina Pension Fund which fund was administered according to a different set of Pension Rules.” It was further pointed out that the evidence of DW1 in the Court below on page 303 of the Record of Appeal was that:- “There are two types of plaintiffs before this Court. As earlier stated, there were two groups. One of 1993 where the issue of Pension Conditions was subject of the petition and then other group was the one of 1998 retrenchment exercise.” Mr. Shonga therefore, submitted that the Court below fell in error when it failed to identify the two types of plaintiffs before it. State Counsel contended that in fact, the holding appealed against is clearly based on the Court’s earlier finding on page 30 of the Record of Appeal that:- J16 (289) “In particular I find that each plaintiff is entitled to be paid under Rule 11(ii) after the transfer of their contributions from ZISC. I enter judgment in the plaintiff’s favour and order that the whole matter be treated on basis of the Rules that applied to each one of them at the time of separation.” It was argued that clearly the Court failed to appreciate that there were two Pension Funds it had to consider. Based on this premise, Mr. Shonga’s submissions in ground one, are therefore, two fold and he endeavoured to advance his arguments on the same. In relation to the respondents who left employment in 1999, State Counsel submitted that the evidence was ably put before the Court by PW4 who told the Court that she left employment in April, 1999; and that before retrenchment she subscribed to Saturnia Regina Pension Fund who were her Pension Managers, during examination in Chief PW4 stated that:- “I want the company contributions from BP. My argument is that BP kept my company contributions …… I am sorry everyone who was retrenched in 1999 received their own contributions. My evidence is for those who were asking for the company contributions.” J17 And in re-examination PW4 said that:- (290) “I made a contribution and the company added their contribution and at the end of the year the two were added together plus a bonus and these monies were deducted monthly. I only got my own contributions.” It was contended that numerous issues arise from PW4’s testimony and these include:- (a) That she was retrenched in 1999; (b) Before she left employment she belonged to Saturnia Regina Pension Fund; (c) Her testimony before the Court was on her own behalf and all those retrenched in 1999; (d) She was paid her own contributions and so was everyone who was retrenched in 1999. Mr. Shonga argued that in addressing the issues raised, it is important to allude to the appropriate pension rules, these being the Saturnia Regina Pension Fund Rules. Rule 9 is instrumental, it provides as follows:- “9. LEAVING THE COMPANY’S SERVICE (a) Should a member leave the service of the company before normal retirement date other than Early Retirement or dismissal he shall have one of the following options:- J18 (i) To take a pension commencing on his normal retirement date for the amount secured by his and the company’s contribution during his period of membership of the Scheme; (291) (ii) To transfer an amount in substitution for the pension benefits in accordance with Sub-Clause 9(d) herein below; (iii) To take cash in accordance with the income tax regulation in force at the time, being his own contributions and interest thereon as shall be advised by the Trustees in full consultation with actuaries. Should a member wish to exercise this option no further benefit will accrue to such a member.” State Counsel submitted that these are the Pension rules that applied to PW4 and all those who were retrenched in 1999. Her evidence, as alluded to earlier, was that she had received her own contributions and so did all those who were retrenched in 1999. She further told the Court that she was claiming for the company contribution. State Counsel added that at page 12 of the Record of Appeal, Volume 3 is a letter from Haki Legal Practitioners, the Lawyers who were representing PW4 to the appellant advising that she had accepted the payments. J19 It was argued that the question to consider now is whether, having accepted and received their own contribution in line with the pension rules, PW4 and all those retrenched in 1999 are entitled to the company’s contributions as well. (292) It was submitted that the pension rules are very clear, Rule 9(a) (iii) was very elaborate and provided that once the former employee opted to receive their own contribution they would not receive any more monies from the fund. It was contended that this was made clear to PW4 and all those who were retrenched in 1994; and that the whole of Volume 3 of the Record of Appeal is proof that those respondents who were retrenched in 1999 were written to and informed. Mr. Shonga argued that because PW4 and all those retrenched in 1999 had exercised their option to receive their own contributions, they were not entitled to the Company’s Contribution. It was therefore, State Counsel’s position that the Court below erred when it failed to consider the evidence before it and ordered that they were entitled to an account of both their own contributions and the Company’s Contribution; and J20 that the Court further erred when it failed to distinguish the fact that those retrenched in 1999 were not members of the BP Zambia Limited Staff Contributory Pension Scheme and could not therefore have been bound by those rules. (293) In relation to the respondents who left employment in 1993, Mr. Shonga pointed out that the evidence was tendered by PW1 who told the Court that:- “I am the plaintiff before this Court with several others. I am asking that I should be paid my full pension benefits and compensation for the loss of interest income on my pension fund which comprise of my own monthly contributions and the employers contributions.” PW1 went on and told the Court that:- “I contributed to the pension scheme for all the time I was in employment of the defendant.” He went on to inform the Court that:- “I left service on 28th February, 1993. I was retrenched. At the time of retrenchment I received a letter from my employers stating that I will forfeit my pension benefits in lieu of the retrenchment package. I did not agree with that and prolonged negotiations followed between me and BP Zambia Limited. During the negotiations BP Zambia refunded my own contribution without interest in the year 2000.” J21 In cross-examination PW1 confirmed that he was suing on his own behalf and on behalf of other plaintiffs. He went on to say that:- “The testimony I have given is on behalf of 228 plaintiffs. It is very true that a long number of plaintiffs were retrenched way after I had left.” (294) It was further pointed out that when PW1 was shown the Pension Rules he confirmed that those were the ones that applied to him although he could not explain which one he was specifically relying on to claim for his pension. It was argued that the evidence of PW1 is significant in determining whether the Court below was right to have granted judgment in favour of the respondents. State Counsel contended that in order to fully understand whether the respondents are entitled to their pension benefits as claimed by PW1 before the lower Court, it is important to outline the pension rules the respondents subscribed to when they were in employment. It was submitted that before the lower Court, the respondent produced the BP Zambia Limited Staff Pension Scheme Rules, which formed the basis of the J22 relationship between the respondents and the pension fund managers. The objectives of the rules were laid down in Rule 2 which provided that:- “The objectives of the fund is the provision of pension to members on retirement on the Normal Pension Date or relief for the dependants in the event of their death.” (295) It was pointed out that in these rules, Normal Pension Date was defined as the first day of the month immediately following the 55th birthday of the member, as set out on page 185 of the Record of Appeal. Mr. Shonga argued that the issue to be determined, at this stage, is the cardinal consideration as to which Rules applied to the respondents for them to qualify to receive a pension given their circumstances. It was pointed out that when PW1 was shown Rule 6 of the Pension Scheme Rules he had this to say:- “Yes, that clause caters for someone who dies whilst on duty. It is not true that that segment 6(b) does not apply to me. Of course, 6(b) will not relate to me because I am still alive. Clause 6(a) yes relates to persons who retired upon normal retrenchment date. The normal retirement date was 55 years. When I left BP I was 42 years.” J23 Mr. Shonga contended that there is no evidence on the Record of Appeal that any of the respondents had reached retirement age on their respective dates of separation. State Counsel pointed out that PW2 was 51 on the date that he first testified, and he was 37 years when he left; PW3 was 47 (296) years in 1993 when he was retrenched; and PW4 was 33 years in 1999 when he was retrenched. It was argued that clearly not a single one of the respondents had attained the normal retirement age of 55 years when they left employment. It was pointed out that Rule 7 of the Scheme Rules deals with retirement due to ill health; PW1 when asked to look at the Rule answered as follows:- “No, I was not retired on medical grounds. Yes, I agree that Clause 7 did not apply to me.” It was contended that no evidence was tendered before Court to purport that any of the respondents were let go on account of ill health. J24 Mr. Shonga submitted that it is without doubt that the only applicable Rule open to the respondents is Rule 11 which provides as follows:- “11. LEAVING THE EMPLOYER’S SERVICE Should a member leave the service of employer for any reason before the Normal Pension date other than early retirement in accordance with Rule 7 he shall have the following options:- (297) (i) To receive a refund of his contributions paid up to the date of his withdrawal from the fund with interest at four percent per annum; (ii) A member shall be entitled to an accrued pension commencing on the Normal Pension date secured by both the employer’s and employee’s contributions provided that:- (a) He has been a member of the fund for at least five years or at the discretion of the employer this period may be waived; of (b) He is not dismissed for the misappropriation the employer’s monies or other serious misconduct in interpreting the expression ‘other serious misconduct’ for the purpose of this Rule the decision of the employer shall be conclusive. J25 A pension payable in terms of this Rule shall be subject to the provisions of Rule 12. Alternatively an amount in substitute for pension benefits to which such member is entitled or which is granted hereunder, may, subject as herein provided be transferred to any other scheme of fund, with similar objects in operation and approved by the Commissioner of Taxes and to which such member shall be admitted, to secure an additional pension for such member under the Rules of such scheme or fund from time to time in force, provided that the employer shall agree to such transfer and shall be satisfied that under the Rules such scheme or fund, such transferred amounts shall be regarded as money continued by the employer except to the extent that it represents such members own contribution to the scheme or fund.” (298) State Counsel pointed out that, there is no dispute whatever that the respondents all left on redundancies. It was submitted that Rule 11 is what applied to them with respect to their pension benefits. It was argued that according to Rule 11, the affected members would have two options; if a member chose the option under Rule 11(i) that member would be entitled to a payment equal to pension contributions he or she had paid to the appellant or their own pension contributions; if on the other hand the affected member opted to go by Rule 11(ii), that member would be paid on accrued pension. J26 Payment of accrued pension is, however, not automatic or unqualified; that member would only be paid on normal pension date, that is upon attainment of 55 years. It was contended that in view of the evidence tendered before the Court none of the respondents chose the option under Rule 11(ii). It was further contended that it would seem that this crucial fact was overlooked by the Court below. It was submitted that had the Court addressed its mind to this issue, it would not have held that any of the respondents were entitled to be paid under (299) Rule 11(ii); the need for an account to be rendered does not, therefore, arise. It was argued that there is an important proviso to a member who seeks to benefit from the accrued pension under Rule 11(ii); this is that such pension should be transferred to another Pension Scheme or Fund, and the employer has to agree to such transfer. It was contended that there was no finding by the Court below that another pension Scheme or fund J27 had been identified by the respondents where they intended to transfer their pension benefits. The cases of RAPHAEL MWALE AND RUTH PHIRI -VS- BP ZAMBIA LIMITED (1) and BP ZAMBIA PLC -VS- YUYI MUBITA LISHOMWA, HASTINGS GONDWE, SINGUMBE KEITH MUTUPO AND MIKE KABWE (3) where the Court had occasion to make determination on these Pension Rules were cited. It was submitted that the cases they have cited confirm the position this Court has taken in interpreting the BP Pension Scheme Rules. It was pointed out that in all the cases, the former employees were claiming their full pension benefits but this Court (300) established that because they had not reached their normal pension age, they were not due for pension and consequently were only entitled to their own pension contributions. Mr. Shonga contended that this action is not different; and that this case is on all fours with the RAPHAEL MWALE AND RUTH PHIRI (1) and the holding in that case is binding and that, J28 therefore, following the decision in that matter, the respondents are only entitled to their own pension contributions. State Counsel therefore, submitted that the Court below erred when it failed to interpret the provisions of the pension Rules in line with the decided cases of RAPHAEL MWALE AND RUTH PHIRI -VS- BP LIMITED and LISHOMWA AND OTHERS -VS- BP ZAMBIA PLC. (3) In relation to ground two of the appeal, Mr. Shonga submitted that their submissions under this ground are in the alternative and he argued that should this Court be of the view that the lower Court was on firm ground in its judgment, State Counsel believed that the Court below erred in both law when it held that the judgment sum should have penal interest. It was pointed out that the lower Court made the following (301) finding:- “2. The values realized should bare a penal interest rate based on the current average banking lending rate per annum from the date of separation to the date of writ.” It was submitted that the Court was in error when it applied penal interest because the position of the law in Zambia J29 is that penal interest is illegal. Reference was made to the case of UNION BANK (Z) LIMITED -VS- SOUTHERN PROVINCE CO-OPERATIVE MARKETING UNION. (4) State Counsel submitted that the applicability of interest to any judgment sum is aimed at meeting the ends of justice and this Court has always frowned upon imposing of interest that defeat such purpose. The case of RAPHAEL MWALE AND RUTH PHIRI -VS- BP ZAMBIA LIMITED (2) was cited where this Court reversed interest imposed by the Deputy Registrar because it did not meet the ends of justice. It was contended that in this case, it is clear therefore, that not only is penal interest illegal in Zambia but its applicability would certainly defeat the ends of justice as penal interest is (302) punitive. Mr. Shonga prayed therefore, that their ground succeeds. In response, Mr. Chishimba filed respondents’ heads of arguments on which he solely relied at the appeal hearing. Counsel further relied on the plaintiffs’ submissions filed in the Court below. J30 In response to grounds one and three of the appeal, Mr. Chishimba submitted that it was well established in evidence that the pension Scheme that was set for the benefit of the respondents was made up of contributions from both the appellant and the respondents; and that during the substance of the Scheme, the appellant created a defect in the pension Scheme and upon being advised what amounts were needed to up-date the pension the appellant unilaterally terminated the Scheme and caused to be paid out to itself the sum of K720,056,600. It was pointed out that the finding of the Court below is in fact in line with Rule 5(a) (iii) of the Pension Scheme Rules. Mr. Chishimba contended that the respondents as beneficiaries were, and are (303) entitled to know the amounts being amortised for them as they had a future interest to protect. Counsel argued that it is against this background of default and lack of accountability that it becomes necessary for the appellant to account. Concerning the appellants’ claims that J31 there were two Pension Schemes, Mr. Chishimba submitted that even assuming, but not admitting, that this was the case; it does not still change the appellant’s obligation to account to the respondents as beneficiaries of the Scheme. It was contended that the Pension Scheme was the same, save that the Fund Managers were different. Whilst the group that was declared redundant in 1993 had their Fund administered by the Zambia State Insurance Corporation Limited, the 1999 group was by Saturnia Regina, another Fund Manager. Counsel added that the duty to account is still essential. Regarding the question of the failure by the appellant to afford the respondents as members of the Scheme an opportunity to exercise their full options at redundancy, Mr. Chishimba submitted that it is in evidence that the appellant did not accord (304) the beneficiaries their full options as was demonstrated in the case of Pelaja Mukuka where, in a letter sent to her dated 27th March, 1999, her Pension options were tied down to her payment of her redundancy benefits. If she chose to defer her J32 pension, then she would suffer the loss of her retrenchment package. The Court was referred to the plaintiffs’ submissions at page 7 lines 7 to 12. It was contended that the evidence of PW5 Jimmy Mushinkila is essential and has been conveniently avoided by the appellant. Counsel repeated the submissions filed into the Court below on 12th May, 2010 on this point “that Rule 11(i) was only but an option and that in all the cases of the appellants they had rendered service of more than five years and albeit they had not attained the age of 55 years the option under Rule 11(ii) was very clearly available to them unless it could be shown that they were caught up by either 11(ii) and (b). No such evidence has been led by the appellant in relation to the respondents in any event; further that the respondents were forced to cash out or take a refund of their own contributions because it was the cheapest (305) route to the appellant as it entailed the respondents losing the Employer’s contribution; this route favoured the appellant but not the respondents as they could not enjoy their entitlement J33 “to an accrued pension commencing on normal pension date secured by both the Employer’s and Employees’ contributions” as contemplated to by Rule 11(ii) herein before referred to. It was contended that PW5’s testimony that at the time of withdrawal the appellant as employer had to give the right to elect which type of benefit the member employee would wish to elect; the options being, to refund member employees’ contributions with interest or, deferred pension; and obtaining transfer value of the accrued pension to another similar approved pension scheme was not challenged. It was submitted that it is, therefore, misleading for the appellant to argue that the respondents freely and voluntarily opted to be paid refund of their own contributions only. Further, it was pointed out that since this is a Contributory Pension Scheme, all contributions made by both the Employer and the Employee, were for the benefit of the employee. It was contended (306) J34 that Rule 19 of the Scheme Rules forbade the reversion of the amounts amortised by the appellant as Employer from reverting unto itself. It was pointed out that more recently the Supreme Court acknowledged this point in RAPHAEL MWALE AND ANOTHER -VS- BP ZAMBIA PLC (2); and that the respondents are claiming their accrued pension benefits up to the point of termination of service made up of both their contributions and that of the appellants as accrued and not full retirement benefits as if they had reached retirement. Finally, Mr. Chishimba submitted that this action was commenced in August, 2002; at no point during the proceedings below did the appellant object to any of the 235 respondents being party to the proceedings. It was argued that the appellant cannot be heard to object to some of the respondents being entitled to judgment when they have been parties since 2002, have been similarly circumstanced and no application was made to strike out for misjoinder any of the parties. (307) J35 In response to ground two, it was contended that the trial Judge was correct in penalizing the appellant with interest at current Bank rate due to the negligent and imprudent manner the appellant conducted itself; the appellant deserved to be penalized due to its aggravating conduct as is shown by the following facts:- (a) (b) (c) The appellant misled the respondents into believing that there would be a pension Scheme benefit made up of the respondent’s contributions and that of the appellant which would grow in fund. At the end of the day, the appellant has only offered a payment of the respondents’ own contributions. What is the point of the Scheme then? The appellant as settler of the Trust was actually in breach of trust by causing a deficit in the pension fund. This evidence was led by PW5 and was never challenged; The appellant further acted in contumelious disregard of the respondents’ rights when it breached the pension Rules by causing to be paid the Pension Fund money upon termination of the Trust Fund; (d) The appellant interfered with the Pension at the expense of the respondents as beneficiaries. It was submitted that it will be noted that the respondents had claimed damages or equitable compensation as part of their relief sought; the Court below rightly substituted this claim with J36 (308) penal interest because this has been after all a monetary claim. It was contended that this is a finding of fact and has not been appealed against. It was argued that the penal interest stems from the appellant’s conduct towards its former employees; and that the Court had found as a fact that the respondents were treated badly from the date of separation. It was pointed out that this Court has awarded exemplary damages for aggravating conduct. In support, the Court was referred to the case of GERTRUDE MUNYOSI, ATTORNEY GENERAL -VS- CATHERINE NGALABEKA (5) where it was held inter alia that:- “Where the tortuous circumstances are serious, then the award must reflect the circumstances, as well as the impact of inflation in order to arrive at a fair and reasonable amount.” Mr. Chishimba submitted that the case of UNION BANK - VS- SOUTHERN PROVINCE CO-OPERATIVE MARKETING UNION (4) which was relied on by the appellant is distinguishable from the case at hand. In that case, the Court was concerned with the application of penal interest calculated J37 in a contractual clause; whereas in the instant case, the Court was exercising its (309) discretion as to interest in order to do justice, which discretion the Court enjoys in its jurisdiction. It was argued that if interest as prescribed in the Scheme Rules of 4% only was to be applied, this would be a clear mockery of justice in the circumstances. Counsel submitted that the Court was therefore, on firm ground in view of the circumstances of this case to penalize the appellant with interest at current commercial lending rates in addition to the normal interest rate prescribed by the Pension Scheme Rules to redress the inflation and lost investment opportunities by the respondents. We have considered the grounds of the appeal; the heads of arguments that have been filed on behalf of the parties; the evidence that was adduced before the Court below; the authorities that have been referred to; and indeed the judgment of the Court below that has been appealed against. J38 In grounds one and three of the appeal, the trial Court has been challenged when it held that the appellant should submit an account of the true values of the pension contributions for both (310) employee and employer to be rendered to each respondent and that all 235 respondents were entitled to judgment. It was contended in support that the trial Judge made the order without considering the evidence of the witnesses before him; that the said evidence showed that there are two types of respondents: those retrenched in 1993 and those retrenched in 1999; and that there are two pension Scheme: Saturnia Regina Pension Fund and BP Zambia Limited Staff Contributory Scheme. In response it was argued that it was well established in evidence that the pension Scheme that was set for the benefit of the respondents was made up of contributions from both the appellant and respondents; that the Pension Scheme was the same save that the fund Managers were different, whilst the J39 group that was retrenched in 1993 had their fund administered by the Zambia State Insurance Corporation, the 1999 group was by Saturnia Regina another Fund Manager; and that the finding of the Court is in fact in line with Rule 5(a) (iii) of the Pension Rules. (311) We have considered grounds one and three of the appeal; the heads of argument in support and in response and the relevant portion of the judgment of the Court below. It is clear from the evidence that was adduced before the Court below that there was only one type of respondent; both groups were employees of the appellant. They only differed in the dates when they were declared redundant, one group in 1993 and the other group in 1999. It is no wonder that they brought an action together and that in paragraph 3 of the amended statement it was stated as follows:- “Between the period 1993 and 1999 both periods inclusive the defendant carried out redundancies that effectively terminated the plaintiff’s employment.” J40 Further, we have found that there were no two Pension Funds. There were different Pension Fund Managers. The evidence shows that those in employment in 1993 the Pension Fund Manager was Zambia State Insurance Corporation up to the time of cessation and then Saturnia Regina Fund. (312) The evidence has further revealed that the Pension Scheme was established to benefit the members. Rule 2 of the Pension Rules provides that:- “The object of the fund is the provision of pensions for Members on retirement on the normal pensions date or relief for their dependant in the event of earlier death.” And Rule 3 provides that:- “The Employer through the Insurance Corporation shall be responsible for the administration of the Fund and shall keep all necessary records and shall pay all the necessary charges and expenses incurred in connection with the administration of the Fund.” The administration of the Fund is according to Rule 3 entrusted to the employer through the Insurance Corporation. The funding of the Fund is through contributions by employees J41 who contribute ten percent and the employer which contributes fifteen percent. As the trial Court found, the money so contributed belongs to the Members. Further, Rule 19 of the Pension Rules provides that:- “Monies not to revert to employer. No contributions or premiums shall revert to or become the property of the employer.” (313) Further, as the trial Court held; ‘each of the plaintiffs had a right to know what exactly was due to them under the Pension Scheme at the time of separation before each one of them was called upon to exercise any options under that Scheme.’ Since the Scheme was established to benefit the members and as they contributed the money to the Pension Scheme and as they have a right to know what exactly was due to them under the Pension Scheme at the time of separation, one cannot fault the trial Judge for making the Order complained of. Further, the evidence being that, all 235 respondents were employees of the appellants who were retrenched at different J42 times; and that they were members of the Pension Scheme, the trial Judge cannot be faulted for entering judgment in favour of the 235 respondents. The appellants did not adduce any evidence to show why the Court should not enter judgment in favour of all 235 respondents. (314) In the circumstances we find no merit in grounds 1 and 3 of the appeal, these grounds are, accordingly dismissed. In ground two of the appeal the trial Court has been attacked when it held that the values realised should have penal interest based on the current average banking lending rate per annum from the date of separation to the date of the writ. It has been submitted in support that the Court was in error when it applied penal interest because the position in Zambia is that penal interest is illegal. Reliance was placed on our decision in the case of UNION BANK (Z) LIMITED -VS- J43 SOUTHERN PROVINCE CO-OPERATIVE MARKETING UNION (4) where we observed that:- “Above all, even if there had been such an agreement, it would have been liable to be struck down and not enforced for being penal objectionable at common law… We are not surprised that Government intervened to affirm the common law when it passed a Statutory Instrument (No. 179 of 1995) under the Banking and Financial Services Act (21 of 1994 to formally ban penemal interest.” In response it was contended that the learned Judge was correct in penalizing the appellant with the interest at current Bank rate due to the negligent and imprudent manner the (315) appellant conducted itself. The appellant deserved to be penalized due to its aggravating conduct. It was submitted that it will be noted that the respondents had claimed damages or equitable compensation as part of the relief sought. It was argued that the Court rightly substituted this claim with penal interest. It was contended that this is a finding of fact and has not been appealed against; the penal interest stems from the appellant’s conduct towards its former employees. Further, according to the respondents, the case relied upon of UNION BANK (4) is distinguishable from the case at hand. J44 We have considered ground two of the appeal; the arguments in support and in response; the authorities referred to; and indeed the relevant portion of the judgment of the Court below. We would agree that as we said in the UNION BANK (4) case, that:- “Above all, even if there had been such an agreement, it would have been liable to be struck down and not enforced for being penal objectionable at common law….. We are not surprised that Government intervened to affirm the common law when a Statutory Instrument (No. 179 of 1995) under the (316) Banking and Financial Services Act (21 of 1994) to formally ban penal interest.” As would be noted from the foregoing, penal interest has since been banned. We do not see any reason to depart from our foregoing decision. Further, we do not find any distinguishing features between the UNION BANK (4) case and the case under consideration particularly that the trial Judge did not give any reasons for awarding penal interest. In the case of RAPHAEL MWALE, RUTH PHIRI AND BP ZAMBIA PLC (2) we ordered that interest should be at average J45 short term deposit rate from the date of separation to the date of judgment. Therefore the trial Court was wrong to award penal interest. In the circumstances the order for penal interest is set aside. We award interest rate of 40% from date of separation up to date of judgment 18th October, 2010 and thereafter 25% up to the date of payment. In the light of the foregoing, the appeal has partially succeeded. The appellant to bear costs both in the Court below and before this Court, to be taxed in default of agreement. (317) RETIRED ………………………………… F. N. M. Mumba, ACTING DEPUTY CHIEF JUSTICE ………………………………….. M. E. Wanki, SUPREME COURT JUDGE J46 ………………………………….. E. N. C. Muyovwe, SUPREME COURT JUDGE J47