Ex-Mid-Med employees fight for pension fund

The legal representative of several former Mid-Med Bank employees will be back in court on Wednesday to fight for their share of a pension fund liquidated in 1987.

The former bank employees contend that the bank ignored their claim for their share of this fund, which could have now grown to over €40 million, when a payout was made in November 1987.

When Mid-Med Bank (bought by HSBC in 1998) liquidated the fund, some €3.5 million (Lm1.48 million) was left in the kitty. That money was retained by the bank and written back into its reserves.

Subsequently, two identical cases were instituted against Mid-Med Bank over the issue: one by a six-member action committee and another by the remaining 500 or so former employees. About half of the former employees have already re-confirmed their interest in the case.

The ad hoc committee says that the issue dates to 1975 when discussions were held between Mid-Med Bank, the Central Bank (which represented the government) and the unions, over the fate of employees of Barclays Bank, which was to become Mid-Med Bank.

The employees' salaries were reduced with the changeover, as the government insisted it could not increase wages because anomalies with other government bodies would arise. To compensate, Mid-Med Bank agreed to set up a non-contributory pension fund for employees, putting aside the equivalent of around 20 per cent of employees' salaries in the fund annually. This was done up to 1987.

In 1979, when the government's two-thirds pension regime was instituted, the union approached the bank to liquidate the fund, as the law at the time stipulated that employees were only entitled to a maximum pension of two-thirds of their annual salary.

Consequently, had the bank employees kept both, they would have automatically lost their right to national insurance. The bank, however, refused to liquidate the fund, and negotiations with the unions dragged on for eight years. In 1987, Mid-Med Bank decided to liquidate the fund and only pensionable staff in the bank's employ at the time had benefited. Employees who had left the bank since 1975 were not included in the payout.

The bank claimed that former employees were not entitled to any funds, as they had since left the bank's employ and the money was written back to the bank's profit and loss account.

The ad hoc committee estimates that over the past 20 years, these funds have grown to close to €42 million in the hands of the banks (Mid-Med first and later HSBC) at a conservative return on equity of 12.5 per cent per annum.

In reality, HSBC has been reporting return on equity figures in excess of 20 per cent per annum in recent years, the ad hoc committee points out.

The action committee has since lost its case against HSBC but has appealed against the judgment.

The second case will continue to be heard on Wednesday. In the meantime, the committee says it is prepared to take the case to the European Court of Human Rights.

Asked for the bank's position on the case, a spokesman for HSBC would only say: "The claims made by ex-Mid-Med employees and the bank's position have been exhaustively dealt with in the case Alfred Mangion et vs. Farrugia Av. Dr Riccardo Noe et (Cit. 265/1991). The First Hall Civil Court decided the case in the bank's favour on February 13, 2007. The judgment has been appealed, but the bank remains confident of its position."