High Court penalises bank over ex-employees’ loans

The High Court in Mzuzu has ordered Opportunity Bank of Malawi (OBM) to pay damages for effecting loan recoveries from its retrenched employees without negotiating a repayment plan with them.

OBM issued loans to its staff members, but when the bank decided to lay off some of them because it was making losses, the bank deducted at once the loans from the employees’ retirement packages.

The deductions forced at least 68 fired employees to take the bank to court, arguing the institution had breached a loan repayment arrangement.

In his ruling on the matter, High Court Judge Dingiswayo Madise said the bank was supposed to give the ex-employees an opportunity to prepare a repayment plan and upon approval, OBM was supposed to turn the loans into commercial ones.

Since the loan balances were already deducted, Madise said the bank should not make a refund, but simply pay damages for the inconvenience caused on the ex-workers. He also ordered the bank to pay legal costs for the case.

“By informing the plaintiffs that they could still submit their repayment plans, the defendants were trying to regularise this breach of contract and violation. This cannot be allowed in this court.

“The bank must, therefore, be condemned to pay damages for the inconvenience caused on the plaintiffs. The plaintiffs must be put in the same position as if this breach never occurred. If money can perform this function then damages must be awarded,” reads the judgment in part.

The court has since called on the ex-employees to file summons for assessment of damages before the registrar.

Lawyer for the affected ex-workers, George Kadzipatike, said the case was arguable as the company loan agreements are very clear on repayment plans.

He said the court will have to determine how much should be paid to his clients, adding the damages are not part of the unfair dismissal that his clients are also claiming in the Industrial Relations Court (IRC).

OBM deputy chief executive officer Bernard Mkandawire said he was not aware of the ruling and asked for more time to consult. n