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PEP Botswana Holdings t/a Pep Stores v Letsema (Civil Appeal no. 23 of 203) [2002] BWCA 34; [2002] 2 B.L.R. 121 (CA) (28 July 2002)

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IN THE COURT OF APPEAL FOR THE REPUBLIC OF BOTSWANA
HELD AT LOBATSE
Civil Appeal No. 23/2002
Industrial Court Case No. IC 226/2000
In the matter between:
PEP BOTSWANA HOLDINGS t/a
PEP STORES       Appellant
and
MAGDELINE LETSEMA        Respondent
Mr Omotoye for the Appellant No appearance for the Respondent
JUDGMENT
CORAM:   TEBBUTT Ag. JP
GROSSKOPF JA DOW Ag. JA
TEBBUTT Ag. J.P.
The issue in this appeal is whether an employee whose services were terminated
by her employer was entitled 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.

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Stock losses in her branch between October 1997 and June 1998 exceeded the acceptable minimum of 2% laid down as policy by the appellant and, averring that this was her responsibility and that it showed an 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
"You will be paid leave pay, months salary, 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 to her. Dissatisfied with the payments made to her the respondent applied in the Industrial Court for payment of :-
(i) six months' compensation for unfair dismissal at her salary of P928.00 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 unfairly dismissed and accordingly awarded her no compensation in terms of claim (i) above but held that she was entitled to severance benefits which the court assessed in the sum of P8774 and awarded her those. No order as to costs was made. It is against the award of P8774, and that alone, that the appellant comes on appeal to this court.
The payment of severance benefits is governed by the provisions of Section 28(1) of the Employment Act (Cap47:01), 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 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 dependent or beneficiary, is at that date or some future date entitled to the payment of a gratuity or a pension or both gratuity and pension in respect

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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 what that the respondent was
not entitled to severance benefits "as 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% of her monthly salary to the Fund and the appellant, as employer, a like amount i.e. also 7.5% of her monthly salary.
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

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"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 (including transfer values) plus Investment Returns pjus a percentage of the employer's net contributions based on the following scale."
Then follows a scale reflecting that for 10 or more years' service, 100% 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 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 Rules shall be available to him/her.
A.3.2.   Payment of withdrawal Benefit

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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." 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 fund
portfolio plus
an additional benefit calculated in accordance with the table
below."
Then follows a table reflecting that for 10 or more year's service, 100% is paid of the "percentage of unpaid balance in the member's individual account" plus "the amount in the Member's Additional Contributions Account".
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.

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In the respondent's case, therefore, as she had 11 years' service before her dismissal, the appellant, as employer, had to pay her, in addition to refunding her own contributions together with the accumulated interest thereon, 100% of appellant's contributions to the fund in respect of the respondent.
As this Court required complete clarity that the aforegoing 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 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 Section 28(1) of the Employment Act. It is clear from its provisions that if the respondent was, at the date of the termination of her employment with the appellant, entitled to the payment of a gratuity or pension, then no severance benefit 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

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pension, (see Botswana Building Society vs Annah Seemule Civ. App. 30/2001 (C.A.) unreported, at pl6). The court a quo was therefore correct in its judgment on that score. But that is as far as it went. 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.
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 s.v. "bounty")
In construing "a gratuity" in a local pensions Act in Britain, Lord Asquith in Holloway v. Poplar Corporation f 19401 1 K.B. 173 at 178 said:
"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)

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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 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 personally nor was represented at the appeal. A rough calculation (without applying any rates of interest) shows that the appellant's contribution totals P9187.20, which is more than the severance benefit of P8774 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.
It is therefore ordered as follows:

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 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 Fund, which include the appellant's contributions in respect of the respondent to the Fund as set out in the rules, are paid to her forthwith.
Delivered in open Court at Lobatse this 23rd day of July 2002
P H TEBBUTT ACTING JUDGE PRESIDENT

I agree

F H GROSSKOPF JUDGE OF APPEAL


I agree
U. DOW
ACTING JUDGE OF APPEAL

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