DANIEL K. BANNOR & 74 ORS vs KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY (KNUST) & ANOR

Dr. Poku Adusei, JA:

The paramount issue for consideration in this appeal is whether ex-gratia or end of service benefits paid upon retirement was amenable to tax deductions. The plaintiffs/appellants (hereinafter referred to as plaintiffs) worked with the 1st defendant/respondent (hereinafter referred to as 1st defendant or university) for decades, and were paid severance packages upon retirement from the services of the university. The severance payments or retirement benefits were twofold: pensions on the one hand and ex-gratia or end of service benefits on the other.

The instant dispute therefore turned on what the parties described in their pleadings as ex gratia or end of service benefits paid by the defendants to the plaintiffs. It is the case of the plaintiffs that the defendants wrongly and unlawfully deducted taxes from the amounts paid to them as ex-gratia as per their Unified Conditions of Service for Unionised Staff of the Public Universities of Ghana. The said conditions of service document, tendered as Exhibit ‘G’, is at pages 293 to 330 of the Record of Appeal (ROA).

In search of a remedy, the plaintiffs took out a writ of summons, with an accompanying statement of claim, against the defendants for:

i. A declaration that the tax deductions made from plaintiffs’ pension benefit (ex-gratia) is wrong and unlawful since same is contrary to the provisions of the 1992 Republican Constitution of Ghana and the tax law/Act of Ghana.

ii. An order of the honourable court compelling the defendants to make full refund of the tax deductions made from the pension benefits (ex-gratia) of the plaintiffs.

iii. An order of the honourable court compelling the defendants to pay interest on the wrong [sic] and unlawful tax deductions.

iv. Costs including legal fees.

The defendants resisted the plaintiffs’ action. They contended that per the applicable law, ex-gratia or end of service benefit payable to a retiring employee was taxable, and that it is only pension which is tax-exempt. The defendants asserted that the payments made to the plaintiffs were not pension entitlements, but rather one-off end of service payment made to the employees upon retirement.

The plaintiffs filed a reply and joined issues with the defendants. The following issues were then set down for determination by the trial court:

i. Whether or not the tax deductions made from the plaintiffs’ pension benefits (ex-gratia) [was] wr