County government of Mombasa wins Sh2.5 billion case against LAPFUND

A High Court in Mombasa has declined to order the county government of Mombasa to remit more than Sh2.5 billion in pension funds to the Local Authorities Provident Fund Board (LAPFUND).

Justice Monica Mbaru said LAPFUND's claim failed to consider the dynamics of new recruitment and exits due to termination of employment, death or retirement.

The judge said a general call to remit a given amount of money to the fund from 'contributors' without recourse to the above dynamics and the employee as the interested party whose rights are to be secured, negates the claim.

"Accordingly, the claim that the respondents should be ordered to remit Sh2,586,515,277.74 is without good foundation and is hereby struck out. Each party to bear its costs," said Justice Mbaru.

County's finance officer

In the suit, LAPFUND sued the county government and the county's finance officer for failure to remit the said funds.

Justice Mbaru said the claim that the county stopped making remittances from May 2013 to date but has been making retirement benefits to employees who have since retired is without evidence of record of the employees whose remittances were secured by May 2013 or those whose retirement dues from the fund have been paid.

"Without the subject employee, whose benefits are to be secured under LAPFUND as the 'contributor', the claimant's claim is general and without particulars of any beneficiary. The relations between the parties bear a tripartite. Without the affected employee, the 'contributor', the claim before this court cannot hold," she said.

The county government denied the claims made saying it has not failed to deduct and remit retirement savings of its employees, as alleged.

Through lawyers Fred Adhoch and Furaha Kenga, the county government said non-remittance emanates from budget restrictions, shortfalls from the national government and delayed disbursements.

Adhoch said the retirement savings for a percentage of its employees' salaries, and statutory deductions are budgeted for and allocated separately in the county's annual budget. Therefore, the payment of one is unaffected by the other and is only subject to budgetary allocations.

"The alleged non-remittance of Sh2,586,515,227.74 is concerning third parties being Mombasa County employees. The claim is exorbitant and without justification," said Adhoch.

However, in her testimony, LAPFUND Finance Manager Rhoda Chemashack said under Section 132 of the County Government Act (CGA), all members, officers, and staff of a county government subscribe to an existing retirement scheme for officers and staff of local authority and by dint of these provisions, the county must make contributions on behalf of its employees to the retirement authority.

Makes it mandatory

Chemashack said Section 8(3) of the LAPFUND Act and Part 7(1) of the Sixth Schedule of the Constitution makes it mandatory for county governments to contribute to the fund sums deducted from its employees and a further sum equal to the total of such deductions.

She said Mombasa County failed to remit 27 per cent of the salary for each employee, resulting in a non-remittance of Sh2.586,515,227 as of April 16, 2021.

The manager said that at the time of giving evidence on June 30, 2023, the non-remittance stood at Sh5,809,663,308.

"That the employees of the county (respondents) subscribe to and contribute their retirement savings at the rate of 12 per cent of their salary and Mombasa County as the employer matches with a contribution of 15 per cent of the gross salary making total due to the claimant 27 per cent of such salary," said Chemashack.

She said despite deduction from the employees of the county, the county finance officer has, since May 2013 failed, refused, and neglected to remit the same to the LAPFUND.

"Despite the non-remittance of the contributions, the claimant is obliged to pay employees their retirement dues upon leaving employment, whether the prescribed amount has been remitted by the county or not," said Chemashack.

She said the no remittance of contributions threatens the economic well-being of current and former employees who have diligently served the county government for a significant period of their lives.