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PEP BOTSWANA HOLDINGS t/a PEP STORES v. LETSEMA 2002 (2) BLR 121 (CA)
Citation: 2002 (2) BLR 121 (CA)
Court: Court of Appeal, Lobatse
Case No: Civ App No 23 of 2002
Judge: Tebbbutt AJP, Grosskopf JA and Dow AJA
Judgement Date: July 23, 2002
Counsel: Omotoye for the appellant. No appearance for the respondent.
Flynote
Employment law - Pension fund - Withdrawal from - Payment to withdrawing member of
employer's contribution to the C fund - Whether such constituting a gratuity for the purposes of s
28(1)(ii) of the Employment Act (Cap 47:01).
Headnote
The payment to a member of a pension fund of the employer's contribution to the fund is a gratuity
as envisaged by s 28(1)(ii) of the Employment Act (Cap 47:01).
Case Information
Cases referred to: D
Botswana Building Society v. Seemule [2002] 1 B.L.R. 34, CA
Holloway v. Poplar [1940] 1 K.B 173
APPEAL from a decision in the High Court concerning severance benefits payable to the
respondent. The facts are sufficiently stated in the judgment. E
Omotoye for the appellant.
No appearance for the respondent.
Judgement
Tebbutt AJP:
The issue in this appeal is whether an employee whose services were terminated by her employer
was entitled F to be paid severance benefits or not.
The respondent was employed by the appellant as an assistant branch manager from 1 June 1987 to
22 July 1998.
Stock losses in her branch between October 1997 and June 1998 exceeded the acceptable minimum
of 2 per cent laid down as policy by the appellant and, averring that this was her responsibility and
that it showed an G inability on her part to control stock losses, the appellant on 22 July 1998 wrote
to the respondent stating that 'in view of these big losses, the management has decided to terminate
your services with the company'. Her services were terminated as from that date. In its aforesaid
letter the appellant informed the respondent that: H
'You will be paid leave pay, months salary (sic), notice pay and your provident fund will be paid
to you later as it has to be applied for from the insurance.'
It is common cause that the last cited sentence referred to the respondent's contributions to the
appellant's pension fund. These were in due course paid
2002 (2) BLR p122
TEBBUTT AJP
to her. Dissatisfied with the payments made to her the respondent applied in the Industrial Court for
payment A of:
(i)
six months' compensation for unfair dismissal at her salary of P928 per month;
(ii)
severance benefits for the period 1 June 1987 to 22 July 1998.
The Industrial Court, in a written judgment delivered on 11 May 2001, held that the respondent had
not been B unfairly dismissed and accordingly awarded her no compensation in terms of claim (i)
above but held that she was entitle to severance benefits which the court assessed in the sum of P8
774 and awarded her those. No order as to costs was made. It is against the award of P8 774, and
that alone, that the appellant comes on appeal to this court. C
The payment of severance benefits is governed by the provisions of s 28(1) of the Employment Act
(Cap 47:01), as amended. Section 28(1) reads thus:
'(1) Without prejudice to section 31, on the termination of a contract of employment, whether
by reason of the death or retirement of the employee or for any other reason, the employer shall pay
to an employee who has been in D continuous employment with him for 60 months or more a
severance benefit at the rate prescribed.
Provided that (i)
...
(ii) where, upon the date of payment of any severance benefit, the employee, or his
dependant or beneficiary, is E at that date or some future date entitled to the payment of a gratuity or
a pension or both gratuity and pension in respect of the period of employment under the contract, no
severance benefit which would otherwise be payable in terms of this section to the employee or his
dependent or his beneficiary shall be payable.'
The appellant's attitude in the court a quo was that the respondent was not entitled to severance
benefits 'as F she was a member of the Pep Botswana Pension Fund'. I shall refer to the latter as 'the
fund'. It added that she was 'only entitled to a refund of her contributions to the fund'.
I interpose to record that the respondent contributed 7,5 per cent of her monthly salary to the fund
and the appellant, as employer, a like amount, ie also 7,5 per cent of her monthly salary. G
In its statement that the respondent was only entitled to a refund of her contributions the appellant
was, in terms of the rules of the fund, in error and this was conceded by Mr Omotoye, who appeared
for the appellant.
The fund is one underwritten by an insurance company, Metropolitan Life of Botswana Limited
(Metropolitan). In a brochure entitled 'Pep Botswana Pension Fund' a synopsis of those rules is set
out. In a section headed H 'Withdrawal Benefit' and with a sub-heading reading 'What Happens if I
Resign or I am Dismissed?', the following appears:
'Upon termination of your service with your employer other than death or ill health the following
benefits will be paid: your own contributions
2002 (2) BLR p123
TEBBUTT AJP
(including transfer values) plus Investment Returns plus a percentage of the employer's net
contributions based on the A following scale.'
Then follows a scale reflecting that for 10 or more years' service, 100 per cent of the 'unpaid balance
in the member's individual account' will be paid.
This synopsis appears to be an accurate resume of the actual rule in the fund's rules. That rule is rule
A3 and is B headed 'Withdrawal Benefit'. It reads thus:
'A.3.1 Withdrawal Benefit
If a member is retrenched, dismissed or terminates his/her service with his/ her Participating
Employer before the Normal Retirement Date and is not entitled to any other benefits under the
Fund, the withdrawal benefit set out in the Special C Rules shall be available to him/her.
A.3.2 Payment of Withdrawal Benefit
A.3.2.1 The withdrawal benefit shall be paid to the member in cash in accordance with the
provisions of the Income Tax Act of Botswana. Alternatively, if the Member so wishes, it may be
transferred to another approved pension fund or retirement annuity Fund.' D
The special rules referred to, in which the appellant is reflected as the Participating Employer,
provide under the heading 'Withdrawal Benefit' the following:
'On resignation, dismissal, retrenchment or redundancy Return of the Member's own contributions accumulated at the rates of interest declared by
Metropolitan on its guaranteed E fund portfolio plus an additional benefit calculated in accordance
with the table below.'
Then follows a table reflecting that for 10 ormore year's service, 100 per cent is paid of the
'percentage of unpaid balance in the member's individual account' plus 'the amount in the Member's
Additional Contributions Account'. F
Mr Omotoye stated from the bar that those amounts referred to in the rules under 'Withdrawal
Benefits', other than the member's own contributions, meant the employer's contribution, calculated
in accordance with the formula set out.
In the respondent's case, therefore, as she had 11 years' service before her dismissal, the appellant, as
G employer, had to pay her, in addition to refunding her own contributions together with the
accumulated interest thereon, 100 per cent of appellant's contributions to the fund in respect of the
respondent.
As this court required complete clarity that the afore going was the accurate factual position as
regards the respondent's entitlement, it requested Mr Omotoye to ascertain from the appellant or the
insurers that what he H had said was the factual position, was correct. Mr Omotoye was, however,
unable to do so before the hearing of the appeal was concluded but from what Mr Omotoye said and
from the court's own reading of the rules, the court accepts that the factual position as stated by him
is indeed correct.
I return then to consider s 28(1) of the Employment Act. It is clear from its provisions that if the
respondent was, at the date of the termination of
2002 (2) BLR p124
TEBBUTT AJP
her employment with the appellant, entitled to the payment of a gratuity or pension, then no
severance benefit A would have been payable to her. The court a quo found that she was not entitled
to a gratuity or pension and hence was entitled to severance benefits.
It has been held by this court that a refund of an employee's contributions to a pension fund on the
termination of that employee's service is not a gratuity or a pension. (see Botswana Building Society
v. Seemule [2002] 1 B.L.R. 34, CA. The court a quo was therefore correct in its judgment on that
score. But that is as far as it went. B The Industrial Court was not furnished with, nor did it ask for,
the actual rules of the fund from which it would have found that the respondent was entitled to a
refund of her own contributions, and in addition, payment to her of the appellant's contributions to
the Fund. C
Does the latter represent a gratuity? In my view it does. A 'gratuity' is defined in the Shorter Oxford
Dictionary as inter alia 'a bounty given to service personnel on discharge'; a 'bounty' in turn being 'a
gift' (Shorter Oxford Dictionary sv 'bounty').
In construing 'a gratuity' in a local pensions Act in Britain, Lord Asquith in Holloway v. Poplar
Corporation [1940] 1 KB 173 at p 178 said: D
'I . . . read "gratuity" as wide enough to cover any money gratuitously granted or paid, whether it
is paid in one sum or in installments.'
Money is 'gratuitously' paid if it is 'not earned or paid for' (see the definition of 'gratuitously' in the
Shorter Oxford Dictionary). E
The payment to the respondent of the appellant's contributions is, in my view, an amount
gratuitously paid to her. She neither earned the amount nor was it part of her own earnings. She is
entitled to it only by reason of her membership of the Fund. I therefore hold that as the respondent
was entitled to the payment of a gratuity, she was not entitled to any severance benefit.
I have no doubt that had the Industrial Court been aware of the true facts, it would have come to the
same F conclusion. As it stands, however, its decision - and in consequence its determination - is
incorrect and must be set aside. The appellant has asked that no order be made as to costs.
I feel that this is a happy and satisfactory result from the point of view of the respondent, who
neither appeared G personally nor was represented at the appeal. A rough calculation (without
applying any rates of interest) shows that the appellant's contribution totals P9 187.20, which is
more than the severance benefit of P8 774 awarded to her and this is apart from the refund of her
own contributions.
For there to be no uncertainty as to this court's decision an appropriate order reflecting it will be
made. H
It is therefore ordered as follows:
1.
The appeal succeeds.
2.
The determination and order of the Industrial Court is set aside.
3.
The appellant is to ensure that the full withdrawal benefits to which the respondent is entitled in terms
of the rules of the Pep Botswana Pension
2002 (2) BLR p125
Fund, which include the appellant's contributions in respect of the respondent to the fund as set out in
the A rules, are paid to her forthwith.
Delivered in open Court at Lobatse this 23rd day of July 2002.
Appeal allowed B
2002 (2) BLR p125