Focus has shifted to the computation nightmare and who will eventually shoulder the Sh13.9 billion pension bill owed to employees of Telkom Kenya, which is now fully owned by the government, after the High Court moved to put an end to a decade-old legal dispute.
Teleposta Pension Scheme last week suffered a major blow after the High Court dismissed a petition seeking to stop Telkom Kenya from paying its retired workers up to Sh13.9 billion.
High Court judge John Chigiti dismissed the petition stating that the scheme did not prove that the decision issued by Retirement Benefits Appeals Tribunal in 2017, directing the trustees to recalculate the retirees’ lump sum payment, was wrong.
The former employer had argued that allowing the decision to stand would force the scheme to pay the more than 7,000 pensioners Sh13.928 billion, a move that would significantly prejudice the financial security of all pensioners.
“It is this court’s finding and I so hold, that as the court applies its mind to the doctrine of proportionality it must also weigh the negative impact the application will have on the decree-holder and in this case the pensioners,” said the judge.
The judge ruled that fragile pensioners did not get an opportunity to swear affidavits to tender evidence to demonstrate the pain and suffering they have been “forced to endure as they crawl through the dark tunnel of time as they try and wait to access their retirement entitlements”.
He added that some might have died empty-handed.
“It is this court's firm belief and I so hold, that the effect of the application of the proportionality test as sought by the applicant will erode the pensioner’s entitlements and rights that flow from the judgment,” said the judge.
Telkom, through senior counsel George Oraro, argued that forcing them to make the payment would have a very significant impact on the existence of the scheme, with a possibility of it being put under insolvency.
The former employees, most of who retired in 2007-08, sued the trustees of the scheme arguing that they were underpaid their dues after leaving employment.
Their lawyer Titus Koceyo argued that the trustees miscalculated and underpaid their benefits upon retirement from Kenya Post and Telecommunications Corporation.
After hearing the case, the tribunal noted that a report by NBC Holdings Proprietary (Pty) Limited of South Africa, indicated that there was variance in the amounts received by the sacked employees.
Telkom had relied on figures calculated by Alexander Forbes Financial Services (EA) when they paid the workers who they had relieved duties.
The tribunal had ruled that any computations of benefits by an application of a discounting at age 55 are contrary to regulations as it reduced accrued rights and interest of the retirees.
The scheme moved to the High Court arguing that the parties had agreed before the tribunal that the two actuaries, Alexander Forbes and International Actuarial Consultants (IAC) meet and narrow down areas of difference and present a joint report.
However, instead of relying on the reports by IAC, which was the basis of their claim, the retirees allegedly abandoned their original claim and introduced an entirely different set of calculations prepared by NBC Holdings.
According to Telkom, by directing the scheme to compute the benefits owed to the retirees, the tribunal effectively abdicated its role and delegated it to the scheme.
Further, the scheme argued that the tribunal entertained an appeal from parties who were neither parties nor presented their complaints before the RBA.
The court was informed that the tribunal allowed the introduction of 348 retirees and new issues that had not been raised by the pensioners in the original proceedings.
That scheme also faulted the tribunal, saying it exercised a discretion that it did not have, by prescribing that a factor for 55 years should not be used when computing the amount due to the pensioners when the same was expressly provided for in the Trust Deed and the Rules and without providing for an alternative age and their basis.
According to the scheme, the rules provided that a member could only retire from service at or after age 50 before the age of 55 with the employer’s consent and that they did not have an automatic right to receive an unreduced pension at the age of 50.
Additionally, the scheme rules expressly provide that on leaving service for any reason before the age of 50 years, the benefit entitlement was a deferred pension payable from the normal pension date (age 55) based on the formula set out.
Mr Oraro submitted that the scheme is entitled to the reliefs sought- of quashing the decision of the Tribunal and prohibiting the enforcing the decision.
“I dismiss the Applicants’ (Teleposta) argument under the doctrine of proportionality. However, it would be remiss of me to shut doors to the doctrine of proportionality in judicial review matters in appropriate cases,” the judge added.