Summary of Judgment

1. Introduction

This matter concerned an application in the High Court of South Africa (Gauteng Division, Johannesburg) in which Ms Margaret Lungile Mbatha (the applicant) sought an order directing the Transport Sector Retirement Fund (the first respondent) to pay to her, as guardian and caregiver, the portions of a statutory death benefit allocated to her two minor children following the death of their father, a former member of the fund. The fund’s administrator, Salt Employee Benefits (the second respondent), was also cited.

The dispute arose after the death of Mr Makhosini Andrias Sigasa (the deceased). A death benefit became payable and had to be allocated and distributed under section 37C of the Pension Funds Act 24 of 1956. The fund’s board allocated portions of the benefit to, amongst others, the minor children and the applicant. The applicant’s portion was paid to her, but the board decided that the minors’ benefits would be administered within the fund in terms of section 37C(3) rather than being paid over to the applicant.

The matter proceeded by way of motion proceedings. The application was heard on 20 November 2019, and judgment was delivered on 19 February 2020. The general subject-matter was the mode of payment and administration of pension fund death benefits for minor dependants, and the procedural lawfulness of challenging such a decision.

2. Material Facts

It was common cause that the first respondent is a pension fund established under the Pension Funds Act 24 of 1956, and the second respondent is its administrator. It was also not in dispute that, upon the deceased member’s death, a death benefit became payable and had to be dealt with in terms of section 37C of the Act.

The first respondent’s board identified beneficiaries and allocated the death benefit, including allocations to the deceased’s two minor children (born 30 June 2002 and 9 June 2007) and to the applicant, who is the mother of these children. The applicant’s allocated portion was paid directly to her. The board, however, decided that the minors’ allocated benefits would be administered in terms of section 37C(3), meaning the fund would retain the capital and make payments over time as considered appropriate and in the minors’ best interests.

The applicant alleged, in essence, that she had been the children’s parent and primary caregiver from birth (including during the deceased’s lifetime), that she managed their daily needs, and that the children were not receiving assistance from the benefit while she supported them from limited means. She also asserted that the older child’s schooling needs were pressing and that the children relied on borrowed or donated money despite funds being available from their late father.

The court treated as material the fact that, prior to the filing of the answering affidavit, the first respondent’s attorneys addressed correspondence stating that, acting under section 37C(3), the fund could pay regular monthly instalments and make ad hoc payments for items such as school fees, uniforms, stationery, clothing, and similar needs. The applicant nonetheless pursued the application. The court further regarded it as material that the applicant did not set out primary facts explaining why administration within the fund would be contrary to the minors’ best interests, and she did not challenge the board’s decision by way of a formal review under PAJA or otherwise, nor did she exhaust internal remedies.

3. Legal Issues

The central legal questions were whether the board’s decision to administer the minors’ benefits under section 37C(3) was within the board’s lawful powers, and whether the applicant was legally entitled to direct payment of the minors’ benefits to her as guardian and caregiver.

A further issue was the proper procedural route for attacking the board’s decision, namely whether such a decision constitutes administrative action reviewable under the Promotion of Administrative Justice Act 3 of 2000 (PAJA), and whether the applicant was required to bring a PAJA review and to exhaust internal remedies (or seek exemption from that duty).

The dispute primarily concerned the application of law to fact (the scope of the board’s statutory discretion under section 37C, and the procedural requirements for review), together with an evaluative component related to the asserted best interests of the minor children, insofar as the applicant relied on that consideration to justify direct payment.

4. Court’s Reasoning

The court situated the dispute within the statutory framework of section 37C of the Pension Funds Act, emphasising that the allocation and distribution of a pension fund death benefit occurs in the manner provided for by that section, and that such benefits do not form part of the deceased member’s estate. Relying on the exposition in Mashazi v African Products Retirement Benefit Provident Fund and another 2003 (1) SA 629 (W), the court highlighted the social purpose of section 37C: it protects dependency and restricts freedom of testation, and the fund is not bound by a will or nomination form.

The court explained that section 37C imposes distinct duties on a pension fund board, including identifying beneficiaries, distributing the benefit, and determining an appropriate mode of payment. In relation to minors, the court accepted that the board has three broad options: payment to the guardian, establishment of a trust (section 37C(2)), or administration within the fund with instalments and other payments (section 37C(3)). The court referred to the Pension Funds Adjudicator decisions in Ramanyelo v Mine Workers Provident Fund [2005] 1 BPLR 67 (PFA) and Baloyi v Ellerine Holdings Staff Pension Fund [2005] 7 BPLR 606 (PFA) for the proposition that, on a plain reading, good reason in law and fact is required before selecting an alternative to direct payment.

Applying these principles, the court rejected the applicant’s contention that the board lacked power to administer the minors’ benefits within the fund. The statutory authority to decide which payment method to adopt lay with the board, and the board had exercised that power by opting for section 37C(3). The court therefore found no merit in the argument that the board acted outside its lawful powers merely by choosing to administer the benefits rather than pay them directly to the guardian.

On the applicant’s assertion that administration within the fund was not in the minors’ best interests, the court stressed the evidential standard in motion proceedings: affidavits serve as both pleadings and evidence, as stated in Radebe and others v Eastern Transvaal Development Board 1988 (2) SA 785 (A). The court held that the applicant failed to set out the necessary primary facts to support the conclusion that direct payment to her was in the children’s best interests, or that administration under section 37C(3) was contrary to those interests. Her affidavits described her caregiving role and financial constraints but did not engage with how section 37C(3) administration, including monthly and ad hoc payments, would be inadequate or inappropriate.

The court also treated as significant that the fund had indicated, in correspondence, that it could provide monthly instalments and ad hoc payments for school-related and other expenses, yet the applicant did not raise the minors’ financial requirements in response or request such payments within the section 37C(3) framework. In the court’s assessment, this reinforced the conclusion that the applicant had not properly substantiated the best-interests challenge on the papers.

Turning to the procedural posture, the court held that, unless and until set aside, an administrative act remains effective and capable of producing legally valid consequences, relying on Oudekraal Estates (Pty) Ltd v City of Cape Town and others 2004 (6) SA 222 (SCA). The court stated that it subscribed to the “generally accepted view” that a board decision under section 37C constitutes administrative action for purposes of PAJA, and that PAJA accordingly applies to such reviews, referring to, amongst others, Mashazi, Titi v Funds at Work Umbrella Provident Fund (1728/2010) [2011] ZAECMHC (10 March 2011), Guarnierie v Funds At Work Umbrella Pension Fund and others (47754/2016) [2018] ZAGPPHC 579 (24 May 2018), and other authorities cited in the judgment, while noting the contrary view in Gerson v Mondi Pension Fund 2013 (6) SA 162 (GSJ).

On that basis, the court found the application to be procedurally defective: the applicant did not bring a review under PAJA (or a legality review), did not exhaust the internal remedies provided for in the pension law framework, and did not apply for exemption from the duty to exhaust internal remedies under section 7(2)(c) of PAJA, with reference to the approach in Kim v Afgri Staff Pension Fund and others (2017/47543) [2019] ZAGPJHC (6 February 2019). The court held that, for these reasons, the application had to be dismissed.

As to costs, the court accepted that the applicant was impecunious and that she sought to advance the minors’ best interests. In the circumstances, it was considered appropriate to make no order as to costs.

5. Outcome and Relief

The court dismissed the application seeking payment of the minors’ death benefits to the applicant as guardian.

No order as to costs was made.

Cases Cited

Mashazi v African Products Retirement Benefit Provident Fund and another 2003 (1) SA 629 (W).

Ramanyelo v Mine Workers Provident Fund [2005] 1 BPLR 67 (PFA).

Baloyi v Ellerine Holdings Staff Pension Fund [2005] 7 BPLR 606 (PFA).

Radebe and others v Eastern Transvaal Development Board 1988 (2) SA 785 (A).

Oudekraal Estates (Pty) Ltd v City of Cape Town and others 2004 (6) SA 222 (SCA).

Mashazi v African Products Retirement Fund and another 2003 (1) SA 629 (W).

Titi v Funds at Work Umbrella Provident Fund (1728/2010) [2011] ZAECMHC (10 March 2011).

Themba and another v Retail Provident Fund (Shoprite) and others (WCHC case no 9647/13, 6 May 2014) (unreported).

Guarnierie v Funds At Work Umbrella Pension Fund and others (47754/2016) [2018] ZAGPPHC 579 (24 May 2018).

Moshoshoe v Sentinel Retirement Fund and others (GPJ case no 2506/19, 13 September 2019) (unreported).

Gerson v Mondi Pension Fund 2013 (6) SA 162 (GSJ).

Kim v Afgri Staff Pension Fund and others (2017/47543) [2019] ZAGPJHC (6 February 2019).

Legislation Cited

Pension Funds Act 24 of 1956, section 37C (including section 37C(2) and section 37C(3)).

Promotion of Administrative Justice Act 3 of 2000, section 7(2)(c).

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that the first respondent’s board had statutory authority under section 37C(3) of the Pension Funds Act 24 of 1956 to decide to administer within the fund the death benefits allocated to the deceased member’s minor children, and that there was no merit in the contention that the board was legally obliged to pay those amounts directly to the applicant as guardian.

The court further held that the applicant failed, on the papers, to set out sufficient primary facts demonstrating that the board’s chosen mode of payment and administration was not in the best interests of the minor children, particularly given that administration under section 37C(3) permits monthly and ad hoc payments for the children’s needs.

Finally, the court held that the applicant did not properly challenge the board’s decision by way of a PAJA review or legality review, did not exhaust internal remedies, and did not seek exemption under section 7(2)(c) of PAJA. The application was accordingly dismissed, with no order as to costs.

LEGAL PRINCIPLES

A pension fund death benefit governed by section 37C of the Pension Funds Act 24 of 1956 does not form part of the deceased member’s estate, and the section serves a social function aimed at protecting dependants, even over the deceased’s expressed wishes in a will or nomination form, which are not binding on the fund.

In administering benefits for minor dependants, the pension fund board has a statutory discretion as to the mode of payment, including payment to the guardian, establishment of a trust under section 37C(2), or administration within the fund under section 37C(3) with payments made in amounts and at times considered appropriate and in the minor’s best interests.

In motion proceedings, affidavits operate as both pleadings and evidence, and a party seeking relief must allege sufficient primary facts to sustain the conclusions and remedies sought.

A decision taken by a pension fund board under section 37C may constitute administrative action for purposes of the Promotion of Administrative Justice Act 3 of 2000, and such decisions must be attacked through appropriate review proceedings, subject to PAJA’s requirement that internal remedies be exhausted or an exemption obtained under section 7(2)(c).

An administrative decision remains effective and capable of producing legal consequences unless and until it is set aside by a competent court, consistent with the principle articulated in Oudekraal Estates (Pty) Ltd v City of Cape Town and others 2004 (6) SA 222 (SCA).