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November 23, 2022

IN PERSPECTIVE – 4 OF 2022

Labour Court case

Continued employment after normal retirement age

Solidarity obo Gerhardus Viljoen Strydom and others (the Applicants) v State Information Technology Agency (SITA)[1]

The Applicants were employed by SITA, with the terms and conditions of their employment regulated by their employment contracts and the SITA employment conditions. These conditions stated that normal retirement age (“NRA”) will be regulated by the retirement fund. The rules of the fund the employees belonged to, indicates that NRA is 60 years, with a maximum late retirement age of 67.

All the Applicants were allowed to work beyond NRA. However, in 2017, SITA decided to enforce the retirement age and served the Applicants with retirement notices. The Applicants approached the Labour Court contending that their dismissal was unfair.

Section 187(2)(b) of the Labour Relations Act provides that a dismissal based on age is fair if the employee has reached the normal retirement or agreed retirement age for persons employed in that capacity. The Applicants argued that SITA cannot rely on section 187(2)(b), since by allowing them to work and qualify for salary increases after NRA, SITA had tacitly agreed to a new retirement age of 67 years.

SITA contended that the Applicants’ contracts terminated automatically on NRA, and it could therefore serve them with retirement notices at any time thereafter.

The Labour Court found that the Applicants’ contracts of employment did not terminate automatically when they reached NRA as they continued to render services in terms of their contracts of employment and continued to contribute to the retirement fund. However, although the contracts continued, an employee working beyond NRA works on “borrowed time”. Unless SITA specifically waived its rights to apply the NRA, it is entitled to place an employee on retirement at any time after reaching the NRA. The NRA remains what it is, unless a new contract of employment is entered into.

This judgement corresponds with the Adjudicator’s determination in Burt v Standard Bank Retirement Fund[2], where the Adjudicator found that the employer determines retirement date, not the fund. Although fund rules must define members’ NRA, employees can only remain fund members until a later retirement age if the employer grants them such a contract extension.

Employees that continue to work after normal retirement age, do so on “borrowed time” and the employer may place the employee on retirement at any time, unless their employment contract was specifically amended with a new normal retirement date.

The employer determines an employee’s retirement date, not the fund.

Financial Services Tribunal cases

Divorce – whether correct name of the fund is essential and prescription

Bidvest South Africa Retirement Fund and Pension Fund (the Funds) v KP Siphuma and the Pension Funds Adjudicator[3]

In this divorce case, the fund number and member’s employment number were correctly stated in the divorce order, but the name of the Funds that the member belonged to were incorrectly stated as being the Bidvest Glassock Provident Fund. On this basis, the Funds refused to pay the 50% of pension interest to the non-member spouse as ordered.

The member left service and was paid only his portion of the benefit, while the Funds awaited a variation divorce order based on an interdict that was obtained prohibiting the Funds from processing and paying 50% of the member’s benefit. The member lodged a complaint with the Adjudicator, who ordered the Funds to release the member’s full benefit to him as the divorce order did not comply with the provisions of the Divorce Act, 1979. The Funds subsequently applied to the Financial Services Tribunal (Tribunal) for reconsideration.

The Tribunal found that although the Adjudicator was unaware of the interdict, the interdict is a court order and therefore has precedence over the determination of the Adjudicator and the determination can therefore not stand. Although the matter has become moot because the court order has in the meantime been rectified, the Tribunal did refer to the age-old rule of falsa demonstratio non nocet (“an obvious incorrect name does not invalidate”). This means that if the fund that a member belongs to is identifiable from the divorce order, payment may be made to the non-member spouse.

The member also argued that the non-member spouse’s claim to her portion of the benefit has prescribed. The Tribunal found that court orders prescribe only after 30 years and claims for rectification are not subject to prescription.

The remarks made by the Tribunal are in line with the Pension Funds Act, in terms of which a divorce order will be enforceable if a fund is incorrectly named in a divorce order but is identifiable from the order, for instance the membership number is correct.

A non-member spouse’s claim to his/her portion of the benefit does not prescribe for 30 years and claims for rectification are not subject to prescription.

Prescription of non-payment of contributions

Super Rent (Employer), and SD Hlungwana (Complainant), Pension Funds Adjudicator (Adjudicator), Transport Sector Retirement Fund (Road Freight and Logistics Industry Provident Fund) (Fund)[4]

The initial complaint to the Adjudicator related to the Complainant’s query on the Employer’s failure to make contributions on his behalf during the period from 1998 until 2007.

The Fund was only registered in terms of the Pension Funds Act effective 1 December 2008, from which date the Adjudicator acquired jurisdiction over the Fund. The Adjudicator found that she would not have jurisdiction over the period prior to 2008, and that she can order the Fund to provide information on contributions from 2008.

The Adjudicator found that the Employer failed to pay contributions for April 2008 to July 2008, July 2010 to August 2010, April 2020 to June 2020 and April 2021 to date. She ordered that the Complainant is entitled to relief against the Employer and the Employer was ordered to pay the outstanding contributions, together with late payment interest.

The Employer applied for reconsideration to the Tribunal. The initial written complaint was dated 23 November 2020 and the Employer submitted that any non-compliance before 23 November 2017, should have been excluded from investigation because it is time-barred. The Complainant received annual benefit statements from the Fund and the Employer further submitted that had the Complainant exercised reasonable care, given the three years in which to institute proceedings, his alleged claim in this regard would not have prescribed.

The Tribunal found that the Prescription Act in section 30l relates to the calculation of the three year-period. In this case, the Employer did not make any payment in respect of certain periods, and this failure occurred more than three years from the date on which the complaint was received by the Adjudicator. The absence of payment of contributions distinguishes this case from cases where monthly short payments were made, and where each payment constitutes a tacit acknowledgement of the fund’s obligation to pay contributions according to its rules.

The Tribunal also found that the Adjudicator’s order does not relate to the specific complaint raised by the Complainant and that there is no basis in law and in fact to enable the Adjudicator to consider a complaint that is not before her. The submissions (which related to the newly formed complaint regarding the period from 2008) of the administrator and the Fund were not availed to the Employer.

The Employer was therefore not afforded an opportunity to present its case in respect of the newly formulated complaint. The Tribunal found this conduct was not in line with section 30F of the Act.

The Tribunal ordered the Adjudicator to reconsider the application and expressed its view that the alleged omission to pay contributions, which occurred more than three years before the date the complaint was received, may not be investigated by the Adjudicator.

The conduct of making findings in respect of new complaints amended or created by the Adjudicator for and on behalf of the Complainant, is in the view of the Tribunal unreasonable and unfair to the Employer.

The application of reconsideration was therefore successful.

Since the Tribunal is of the view that non-payment of contributions may prescribe after three years for purposes of lodging a complaint, it is important for funds to interrupt the prescription by following due process in terms of section 13A to collect the outstanding contributions.

All the factors that lead to the withholding of a benefit must be recorded and taken into consideration

Absa Bank Limited (Employer) and Deputy Pension Funds Adjudicator (Adjudicator), Lindelwa Ndlondlo (Complainant), Absa Pension Fund (Fund)[5]

The Employer brought an application for reconsideration against the decision of the Adjudicator, wherein she had ordered the Fund to release the Complainant’s withdrawal benefit to her.

The Adjudicator ordered the Fund to release the Complainant’s benefit on the following basis:

  • that the Fund had withheld the Complainant’s withdrawal benefit without informing her;
  • the grounds placed before the Fund’s board for the withholding of the benefits were not disclosed;
  • the Fund did not have proof of the quantum of the loss as claimed by the Employer; and
  • the Employer and the Fund did not respond satisfactorily to the Complainant on her enquiry about the withdrawal benefit.

The Adjudicator in her determination highlighted that:

  • even though the rules allow for withholding of a benefit, there are limits to this rule;
  • the Fund did not have proof of the quantum as claimed by the Employer;
  • the Fund had failed to submit a trustee resolution reflecting the reasons for the decision to withhold the benefit;
  • the Fund needed to be satisfied that there was no undue delay in the proceedings caused by the Employer; and
  • at no stage did the Fund allow the Complainant an opportunity to be heard.

The Employer submitted that:

  • it had informed the Fund that it had terminated the Complainant’s employment because of alleged fraudulent activities that the Complainant was a party to;
  • it had requested the Fund to withhold payment of the Complainant’s withdrawal benefit pending the outcome of its forensic investigation;
  • it had informed the Complainant of the active criminal case it had opened against her and that the Fund was requested to withhold her withdrawal benefit;
  • it had notified the Fund of its intention to obtain a section 300 compensation order against the Complainant;
  • the Complainant was dismissed after she had pleaded guilty on charges, amongst others, that involved dishonesty and was aware that her withdrawal benefit had been withheld;
  • it had invited the Complainant to make submissions regarding the withholding of her withdrawal benefit, to which she did not respond;
  • the Complainant had participated in a disciplinary hearing where she was represented, and made a statement where she confessed to disclosing confidential information of the Employer’s clients and she pleaded guilty to the charges against her;
  • the Complainant never offered any defence against the allegations of the fraud charges, nor did she raise a defence against the civil claim that was instituted against her; and
  • it had been awarded judgment in its favour against the Complainant and the quantum in the judgment exceeded the amount of the Complainant’s withdrawal benefit.

The Tribunal held that:

  • there was no debate about the Complainant’s conduct regarding her dishonesty and misconduct;
  • the Complainant was given an opportunity to make submissions in respect of the withholding of her withdrawal benefit, but according to the Fund did not respond;
  • it was understandable to conclude that the Complainant was familiar with the withholding of her withdrawal benefit;
  • it did not find an undue delay on the part of the Employer in instituting a civil claim against the Complainant;
  • it agreed with the Employer that by disregarding the Complainant’s written admission, the criminal cases and the Employer’s prospect of success in the civil proceedings, the Adjudicator failed to give appropriate weight to the discretion to decide on whether to withhold the benefit afforded to the Fund under the Fund rules;
  • the Complainant could have made submissions to the Fund as she had an opportunity to do so; and
  • although the Employer had informed the Adjudicator that it intended to institute a civil claim, it was unclear why the Adjudicator did not consider it.

As a result of the above reasons, the Tribunal found the application for reconsideration to be successful and found in favour of the Employer. It set the Adjudicator’s determination aside and remitted the matter back to her for further consideration.

Failure by a complainant to submit his or her response to a section 37D withholding cannot be seen as the complainant not having been given that opportunity.

What constitutes an undue delay cannot be viewed without having regard to the broader activities in each case.

It is important for a fund to record all the activities that have been undertaken by the employer for purposes of exercising its discretion when deciding on whether or not to withhold the member’s benefit.

High court case

Trustees’ discretion should only be interfered with where there are irrational, irrelevant, and improper factors that were considered

Jansen Van Vuuren and another (the Applicants) v Momentum Provident Preservation Fund (the Fund)[6] 

A member of the Fund passed away in 2018 and a death benefit became payable in terms of the provisions of section 37C of the Pension Funds Act (the Act). The deceased member nominated his two sons (the Applicants) and his life partner to receive his death benefit. After conducting its investigations, the Fund concluded that while the Applicants were indeed both legal dependants of the deceased, they were not financially dependent on the deceased. The Fund concluded that the life partner was financially dependent on the deceased and as a result the Fund awarded 100% of the death benefit to her.

Dissatisfied with the decision, the Applicants brought a complaint to the Adjudicator, which was upheld. The Adjudicator set aside the decision of the Fund and ordered it to reconsider the death benefit allocation. The Adjudicator concluded that the board had acted irrationally and misdirected itself in the way it had applied the legal framework to the facts and stated that the board should reconsider the allocation of the death benefit in terms of section 37C(1)(bA) of the Act in respect of the Applicants in their capacity as nominees.

Following the Adjudicator’s determination, the Fund reconsidered the distribution of the death benefit and again decided to allocate the whole of the death benefit to the life partner. The Fund contended that its view was that they accepted that the Applicants were dependants of the deceased as a result of being children of the deceased. The Fund explained that it had taken into account the dependency needs of each of the three dependants it had identified. Since the Applicants already qualify as dependants, they cannot also qualify as nominated non-dependent nominees and the deceased’s nominations are therefore merely seen as an expression of wish. If the amount available for distribution was more than what was required to meet the financial dependence needs of the only financial dependant, the Applicants could have qualified for inclusion in the allocation.

The Applicants remained dissatisfied with the Fund’s decision following its reconsideration of the matter. They then launched an application to the High Court seeking to review and set aside the Fund’s decision and to substitute it with a decision that the benefit is payable to them in equal shares.

The court stated that it is well established that the Fund enjoys a wide discretion. It referred to the case of Fundsatwork v Guarnieri[7] where the Supreme Court of Appeal stated that the fund is vested with a “large” discretion. As such, a reviewing body will not lightly interfere with a decision taken in the exercise of a discretion of this kind. The general principle is that courts will interfere only where it has been shown that the decision maker has considered irrelevant, improper or irrational factors, or where its decision can be said to be one that no reasonable decision maker properly directing itself could have reached.

The essence of the Adjudicator’s reasoning was whether the Fund may be said to have acted irrationally by failing to attach sufficient weight to the fact that the Applicants were nominated beneficiaries of the deceased; and that the matter could or should have been dealt with differently, applying the provisions of section 37C(1)(bA). In this regard, the court found that the Fund could also have reached a different conclusion on the allocation and that such a conclusion might also have been a rational or equitable decision. However, the fact that a different conclusion could have been reached does not mean that the decision taken by the Fund was automatically irrational or inequitable, or that it fell outside the ambit of the discretion afforded to the Fund under section 37C. As a result, the court could not find a basis on which to conclude that the decision the Fund took was inequitable or irrational and the application was dismissed.

A court will only review and set aside a decision of the board if there are exceptional circumstances that would warrant a decision of the court to step into the “shoes” of the Fund. The fact that there may be more than one possible rational and equitable decision in the circumstances, does not mean that a decision taken by a Fund is irrational or inequitable.

Chief Ombud of the Ombud Council

On 20 October 2022 the Ombud Council appointed the Ms Leanne Jackson as the Chief of the Ombud Council in terms of section 188(1)9(2) of the Financial Sector Regulation Act[8]. The Chief Ombud will be in office for a period of five years with effect from 1 November 2022.

The objective of the Ombud Council is to assist in ensuring that financial customers have access to, and are able to use affordable, effective, independent and fair alternative dispute resolution processes for complaints about financial institutions in relation to financial products, financial services and services provided by financial infrastructures.

The office of the Pension Funds Adjudicator forms part of the Ombud Council.

Disclaimer

[1] Solidarity obo Strydom and others v State Information Technology Agency SOC Ltd [2022] 9 BLLR 843 (LC)

[2] Burt v Standard Bank Retirement Fund PFA/KZN/10018/2012/LPM

[3] Bidvest South Africa Retirement Fund and Pension Fund (the Funds) v KP Siphuma and the Pension Funds Adjudicator PFA32/2022

[4] Super Rent, A Division of Super Group Trading (Pty) Ltd, and SD Hlungwana, Pension Funds Adjudicator, Transport Sector Retirement Fund (Road Freight and Logistics Industry Provident Fund), Salt Employee Benefits (Pty) Ltd PFA 73/2021

[5] Absa Bank Limited (Employer) and Deputy Pension Funds Adjudicator (Adjudicator), Lindelwa Ndlondlo (Complainant), Absa Pension Fund (Fund) and Sanlam Employee Benefits (Pty) Ltd (Administrator)[5] PFA69/2021

[6] Jansen Van Vuuren and another v Momentum Provident Preservation Fund and others [2022] JOL 55093 (GJ) 

[7] Fundsatwork Umbrella Pension Fund v Guarnieri and others [2019] 2 BPLR 321 (SCA)

[8] The Financial Sector Regulation Act No 9 of 2017