About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: South Gauteng High Court, Johannesburg
SAFLII
>>
Databases
>>
South Africa: South Gauteng High Court, Johannesburg
>>
2020
>>
[2020] ZAGPJHC 66
|
|
Amplats Group Provident Fund v Anglo American Platinum Corporation Limited and Another (A5011/2020) [2020] ZAGPJHC 66 (18 March 2020)
REPUBLIC OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: A5011/2020
COURT
A QUO CASE NO: 2019/40456
In
the matter between:
AMPLATS
GROUP PROVIDENT FUND
Appellant
and
ANGLO AMERICAN PLATINUM
CORPORATION LIMITED
First Respondent
RUSTENBURG PLATINUM MINES
LIMITED
Second Respondent
JUDGMENT
Weiner
and Senyatsi JJ (Mdalana-Mayisela J concurring):
Introduction
[1]
The respondents are participating employers (the employers) in the
appellant fund (the 'Fund'). It is common cause that, as
participating employers, it is the sole prerogative of the employers
'to determine and vary to which fund ... its employees belong.'
[1]
[2]
Exercising this prerogative, in terms of Rule 9.2.4 of the Fund's
Rules, the employers decided that the employees who are members
of
the Fund were to move to the Old Mutual SuperFund ('Old Mutual'). The
Fund was notified of this decision on 24 April 2018.
[3]
Rule 9.2.4 of the Fund Rules compel the Fund to effect these
transfers in peremptory terms. It provides as follows:
'If an Employer ceases to participate
in the Fund as a result of the decision to participate in order to
establish another Approved
Provident Fund or an Approved Pension
Fund, then the Fund Credit of each Member in Service of that Employer
who is eligible for
membership of such fund on a date determined by
the Trustees
shall
be transferred to such Approved Provident
Fund or Approved Pension Fund. The Employer shall cease to
participate in the Fund on
the finalisation of the transfer. On
transfer of his Fund Credit in terms of this Rule, the Fund shall
have no further liability
in respect of such Member'. [Emphasis
added]
[4]
It is common cause that on 29 November 2018, the Fund concluded that
members' rights and benefit expectations would remain the
same with
Old Mutual, and that members would not be prejudiced by the transfer.
The Fund resolved to effect the s 14 transfers
with the effective
date being 1 December 2018.
Section
14 of the Act and Directive PF6
[5]
In terms of s 14 of the Pension Funds Act 24 of 1956 (the 'Act')
[2]
the Fund is required to submit to the Financial Sector Conduct
Authority (the 'FSCA'), an application so that the affected employee
members' cost savings (or fund credit) in the Fund can be transferred
to Old Mutual. This is done through the transfer of the assets
and
liabilities that make up the members' fund credit in terms of the
process described by s 14. Until these transfers are completed,
the
employees are members of two funds - the Fund and Old Mutual –
and are liable to pay duplicate administration costs.
[6]
Section 14 of the Act regulates the transfer of assets and
liabilities of members. Members do not transfer between funds; they
withdraw from one on joining another.
[3]
The s 14 process requires the Fund to follow the transfer mechanisms
and processes described in Directive PF6. This Directive requires
the
Fund to, inter alia, conduct a communication exercise with members,
and provides that members have a right to object to a transfer.
[4]
It is common cause that the communication exercise was completed on
12 July 2019. The members had 30 days within which to object
to the
transfer. The principal officer of the Fund informed the FSCA that
Directive PF6 had been complied with and that the Fund
was in a
position to submit the s 14 documentation.
Background
to the application in the court a quo
[7]
The Fund contended that the objections had not been dealt with and it
cannot process the s 14 transfer until such time as they
have. The
Fund applied for an extension of time to submit the s 14 application.
The FSCA refused the extension, and the Fund was
instructed to submit
same without any further delay. It did not take urgent steps to
submit the documentation; it submitted that
a further application for
an extension was filed, as the initial application was rejected for
technical reasons. There is no proof
of this application for a
further extension. In any event as the employers submitted, the Fund
cannot resubmit the application,
as the FSCA is
functus officio,
and an appeal is the only appropriate remedy.
[8]
The member appointed trustees refused to vote at the Board meeting of
18 October 2019 because, 'they say that the members did
not want to
transfer to Old Mutual.' The member trustees refused to sign
documentation to enable the process to continue. They
later refused
to sign a round robin resolution to progress the s 14 submission. As
a result of their stance, on 25 October 2019,
the principal officer
sought the FSCA's intervention to resolve the impasse. He stated that
the Fund was embroiled in what appeared
to be a labour relations
issue, and that they were not geared to resolve it.
[9]
The employers contended that the Fund was delaying the process and
thus sought an order from the court a quo requiring the Fund
to do
all things necessary to complete the s 14 transfers of the employee
members to Old Mutual
The
court a quo's order
[10]
On 20 December 2019, the court a quo granted the following order:
'(1)
...
(1)
The respondent shall do all things necessary to complete the
prescribed transfer process of the assets and liabilities of the
employee members of the first and second applicants to the Old Mutual
Superfund in terms of
section 14
of the
Pension Funds Act, Act
24 of
1956 and Directive PF6.
(2)
The Chair of the Fund, Mabatho Seeiso, the Principal Officer of the
Fund, Motlatjo Seima, and
a
trustee nominated by the Chair,
shall complete the relevant documents and do all things necessary to
submit the
section 14
transfer documentation to the Financial Sector
Conduct Authority ('the FSCA') within twenty days from the date of
this order.
(3)
The respondent shall pay the applicants' cost of this urgent
application, such costs to include the costs consequent upon the
employment of two Counsel.'
[11]
In terms of the order, the Fund was to comply within 20 court days -
thus, by 22 January 2020. The Fund did not do so, but
instead sought
leave to appeal Adams J's order. Leave to appeal was granted by the
court a quo on 24 January 2020. This appeal
comes before us as an
urgent appeal as contemplated by Rule 49(18) of the Uniform Rules of
Court.
[5]
The Fund's grounds of
appeal
[12]
The Fund argues that the court a quo erred in the following respects:
12.1. The court a quo overlooked the
statutory provisions contained ins 14 of the Act and Directive PF6;
12.2. In finding against it on the
issue of joinder;
12.3. By ordering that 3 individuals
complete and submit relevant documents to the FSCA;
12.4. In finding that Rule 9.2.4 ands
14 of the Act regulate the process of transfer;
12.5. In elevating tenuous contract
law rights of employers above the statutory rights of the members;
12.6. In overlooking the minutes of
the Board meeting and resolutions of the Board, relying instead on
views of individuals expressed
in various documents;
12.7. In relying on the FSCA letter of
24 October 2019, which did not direct the Fund to submit a s 24
application, even if the
Board is not satisfied that it has complied
with the provisions of Directive PF6;
12.8. In finding that the requisites
of an interdict were met;
12.9. In interfering with the Board's
discretion.
[13]
In summary: first, the court a quo ignored the provisions of s 14 of
the Act read with Directive PF6 in relation to the employee
members'
right to object. Thus, the Fund is ordered to act unlawfully (the
'statutory argument', which deals with grounds 1,3,4,
5, 6 and 7).
Second, the court erred in deciding the non-joinder point in favour
of the employers (ground 2; the 'non-joinder'
point); Third, the
requisites for an interdict were not met (ground 8, the 'interdict
argument'). Fourth, the order is legally
incompetent in that it
compels three individuals to sign documentation, without the Board's
authority and interferes with the Board's
discretion (ground 9 the
'discretion argument'). We will deal with each of these grounds, as
summarised, below.
[14]
Before dealing with all the grounds, it is necessary to deal with the
Fund's main ground of appeal that before the s 14 and
Directive PF6
can be complied with, it is necessary to deal with the members'
objections. The Fund contended that has not been
done. The employers
disputed this. They contended that this issue is not an obstacle to
compliance with the court a quo's order.
The order directs that the
Fund 'do all things necessary' to comply with s 14 and Directive PF6.
This is process based. The order
simply compels the Fund to follow
the procedure set out ins 14 and Directive PF6 within 20 days.
The statutory argument
[15]
These grounds all involve the provisions of s 14 of the Act and
Directive PF6 and will be dealt with together under this heading.
The
Fund submitted that before s 14 and Directive PF6 can be complied
with, it is necessary to deal with the members' objections.
This,
they stated, has not been done.
[16]
The employers, on the other hand, relied on the Board minutes of 18
October 2019 which record that-
'It was noted that the Board had
satisfied the requirements and legally the Board was required to sign
the application or be seen
to be obstructing the process. It was
noted that the Board had limited powers in respect of the Section 14
transfer and the decision
to move from one fund to another was made
by the employer and the Board had no power to overturn the decision.'
[17]
The principal officer had drafted and circulated a round-robin
resolution on 21 October 2019 to authorise the signature of
the s 14
transfer documents. The employers argued that the principal officer
would not have done so if the objections had not been
dealt with. The
Chairperson now states that the Fund has not completed the member
objections process, but he voted for the signing
and submission of s
14 documents with all the employer elected trustees. The
Chairperson's affidavit does not seriously contest
the fact that the
objections were finalised by the Fund. In considering the credibility
of the Chairperson, it must be taken into
account that this stance is
a
volte farce,
having regard to his previous conduct.
[18]
The principal officer of the Fund advised the FSCA on 25 October 2019
that 'the Board is satisfied that it has complied with
Directive 6
and is able to make the certifications required in terms of this
submission.' The Fund, in its opposition to the relief
sought,
disavowed the principal officer's stance. It stated that Directive
PF6 has not been complied with and that the court a
quo overlooked
the minutes of the Board meetings and resolutions of the Board, and
relied instead on the views of individuals expressed
in various
documents. It is noteworthy, however, that the Fund's erstwhile
attorney, in a letter dated 23 May 2019, confirmed that
the Fund had
taken a decision that the transfer process must proceed as far back
as 29 November 2018. The Fund does not disavow
the attorney's
authority in this regard. At the October meeting, when the principal
officer stated that, as she had the casting
vote, she would use it to
vote with the employers' trustees, she was threatened by the member
trustees.
[19]
The Fund submitted that the court a quo elevated the contract law
rights of the employees above the statutory rights of the
members. It
contended that the court a quo failed to consider all the members'
objections to the transfer, a right which the members
have in law.
Rule 9.2.4 is binding on the members. It is therefore incorrect to
submit that contract law was elevated above the
statutory provisions
protecting the rights of members to object. This Rule in no way
interferes with the employees' rights. In
terms of s 14(1)(c) of the
Act, the Registrar will have to be satisfied that that the scheme is
reasonable and equitable in that
it accords full recognition 'to the
rights and reasonable benefit expectations of the members
transferring in terms of the rules
of a fund... '
[6]
The employees' rights are adequately protected by the provisions of s
14 and Directive PF6.
[20]
Although the Fund claims to have several bases upon which the
objections were made, they contended that, in any event, the
employers have misinterpreted paragraph 3.2 of Directive PF6 to mean
that members can only object to the transfer scheme if it
is
prejudicial to them; in other words, they cannot object to the
transfer itself. The Fund submitted that the members can simply
object to the transfer per se, and that it is not necessary for such
objections to be reasonable or justified. Although the objections
raised by the employee members have mutated over the period in issue,
their objections, the employers' responses thereto and this
Court's
view are, in summary, set out below:
The
objections
20.1.
Firstly, it is stated that the Fund has not considered and resolved
the members' objections, as it has not completed the prescribed
processes set out in the Act and Directive PF6. The employers
submitted that the objections raised deal mainly with the calculation
of the transfer value, which issue was considered and explained at
the various Board meetings.
20.2.
The Board minutes demonstrate that each reasonable 'complaint' was
dealt with. If the Fund believed that the objections process
was
incomplete, the question is this: why have they done nothing since
August 2019 to deal with these objections? The Board minutes
of
August and October 2019 show that the Fund has taken no steps to
process the s 14 submission by dealing with these alleged objections.
20.3.
Paragraph 3 of Directive PF6 states that transferring members must be
provided with the transfer values, or reasonable estimates
thereof,
as at the effective date of the transaction. Members must be given
sufficient information about the transfer to ensure
that they can
make an informed choice. The Fund contended that there is no
allegation that the Fund's actuary has completed the
process
contemplated in paragraph 18 of Directive PF6 in order to make the
necessary certifications required.
[7]
The Fund provided no reason why its actuary has not completed the
process. In terms of the order of the court a quo, the actuary
is
obliged to complete this process, if he has not yet done so.
20.4.
The employees were given these values, which were attached to each
employee's payslip and delivered on 10 June 2019. An interim
actuarial valuation as at 30 June 2018 was presented to the Board.
The effective date, which is common cause, is 1 December 2018.
An
updated valuation can be conducted within a short period of time. The
actuary has made a recommendation in relation to the use
of fund
contingency reserves to address any of the historic issues.
20.5.
The Fund contended that members are entitled to freedom of
association and must be given the right to choose to which fund
they
belong. This submission has been dealt with in a related matter in
the Labour Court in
Association
of Mineworkers and Construction Union v Anglo American Platinum Ltd
and Others
[8]
(the 'Labour Court judgment') where it was decided that the employer,
being the second respondent in this instance, 'retains the
prerogative in terms of the contracts of employment of each of the
union's members to determine the provident fund to which its
employees are required to belong. That being so, [the employer] did
not breach the terms of the contracts when it required the
union's
members to join Old Mutual.'.
[9]
This issue is res judicata. In
SAMWU
Provident Fund v Umzimkhulu Local Municipality,
[10]
the SCA confirmed that this is the correct approach for the
interpretation of the right to freedom of association. In the present
case, the employers have the sole prerogative per Rule 9.2.4 (which
is binding on the Fund), and the employees have no right to
choose to
which fund they belong.
20.6.
The Fund submitted that wage negotiations were ongoing and until
resolved, the transfer cannot take place. The wage negotiations
are
labour related issues and are not relevant to the transfer.
20.7.
The Fund submitted that there has been no compliance with the conduct
standard in the communication exercise. The conduct
standard only
applies in respect of transfers lodged with the FSCA from 31 January
2020.
[21]
The court a quo considered the objectives of Directive PF6 in regard
to the objections raised. On questioning by this Court,
counsel for
the Fund referred to the minutes of Board meetings. In the main, the
objections dealt with at the meetings related
to the transfer value.
It is clear from such minutes that all these objections were
discussed and considered. Where the objections
were reasonable, the
issues were resolved. The court a quo considered the objections and
found they had no merit. We share this
view.
[22]
The Fund submitted that the provisions of s 14 and Directive PF6 must
first be complied with, and if the s 14 process conflicts
with Rule
9.4.2, the Act prevails.
[11]
In
Sasol Limited v Chemical
Industries National Provident Fund,
[12]
the SCA affirmed the principle that the Fund is bound to observe and
implement the rules. The SCA held that-
'The
legal principles that apply to pension and provident funds are clear
and uncontroversial. The trustees of
a
fund are bound to observe
and implement the rules of that fund. Their powers and
responsibilities and the rights and obligations
of members and
participating employers are governed by the rules, applicable
legislation and common law. The rules of
a
fund form its constitution
and must be interpreted in the same way as all documents. '
[13]
Obviously, the necessary processes set out in s 14 and Directive PF6
must be followed. There is no conflict.
[23]
The Fund contended that the court a quo upheld a submission of the
employers that 'members could not validly object to a transfer
decision made by an employer'. We did not understand this to be the
employers' case. The employers submitted that they complied
with
paragraph 9.6 of Form A to Directive PF6, which required that 'all
members were given at least 30 days to object to the scheme
of
transfer and all objections were considered and,
where the
complaints are reasonable,
the scheme of transfer was amended'
[emphasis added]. It is foreseen in paragraph 9.6 that complaints
which were not reasonable
cannot be given effect to.
[24]
The employers submitted that the Board minutes demonstrate that each
reasonable 'complaint' was dealt with. Now that this appears
clear,
the Fund's primary contention is that the employers have
misinterpreted paragraph 3.2 of Directive PF6 to mean that members
can only object to the transfer scheme if it is prejudicial to them;
in other words, they cannot object to the transfer itself.
The Fund
believes that all that is required is an objection from the members;
thereafter the transfer is halted. To accept the
Fund's argument
would be tantamount to allowing any member to object to the transfer,
without any valid grounds advanced therefor,
thus preventing the s 14
transfer indefinitely, if not permanently. It was submitted by the
Fund that if the Board cannot resolve
the way forward, the Court
cannot interfere with the Board's discretion and make an order. This
argument is fallacious and undermines
the rule of law. This cannot be
the meaning attributed to paragraph 9.6 of Form A to Directive PF6.
The employers submitted that
the reason for the objections are simply
that the Fund wants the credits transferred to the IGULA Fund
controlled by AMCU, and
that the objections raised are a foil for
this.
[14]
This issue was dealt with in detail in the Labour Court judgment.
[25]
The employers contended further that the Fund does not deal with
those members who have not objected to the transfer, and whose
transfers should have been completed in terms of s 14 and Directive
PF6. In addition, it is not clear how many members have objected
to
the transfer. All the Fund says is that, 'based on engagement with
the affected members their overwhelming stance is against
the
transfer.' In the instant case, there is no evidence of how many, out
of almost 13 000 members, objected to the transfer, and
what the
reasons for their objections were. There is no evidence of the
identity of those members who objected. Counsel for the
Fund was
invited during the argument to assist us with evidence as to whether
any record in writing was kept about the objections
and the
identities of the objecting members. He responded that in such mass
meetings it was not feasible to keep a written record.
Non-joinder
[26]
The Fund contended that there was a non-joinder in respect of the
affected employees, the unions, and the officials who were
required
to sign the documents. The court a quo dealt with this point and
found, correctly, in our view, that the circumstances
of the present
case are in line with the judgment in
Rosebank
Mall (Pty) Ltd v Cradock Heights (Pty) Ltd.
[15]
[27]
The employers submitted that the order will require the Fund to
comply with the terms of Rule 9.2.4 read with s 14 and Directive
PF6.
This will not cause any prejudice to the affected members, as it has
already been determined by the Board that the benefits
will remain
the same and members would not be prejudiced. It is clear that the
present case is distinguishable from the facts in
City
of Johannesburg v South African Local Authorities Pension Fund.
[16]
There is no suggestion in the present case that the employers'
decision to transfer to the Old Mutual fund can be impugned. In
the
City of Johannesburg
case,
the SCA upheld the objection of non-joinder because the order sought
by the respondents, eight years after implementation,
would probably
have a detrimental effect on the rights and interests of some of the
members.
[28]
In relation to the joinder of AMCU, it is not a party to the
contractual relationship between employers and employees and the
Fund. Its role is limited to representing the interests of the
employees through the non-member trustees. The Fund's reliance on
freedom of association has been held not to be relevant in relation
to the transfer from one fund to another. In addition, when
AMCU
sought to interdict the transfer from the Fund to Old Mutual in 2018,
the Labour Court found that there was no joinder required.
This issue
is res judicata and cannot be introduced by seeking a joinder.
[17]
As far as we are aware, no appeal was lodged against the Labour Court
judgment. .
[29]
The Fund claims that it cannot complete the s 14 transfer process
within the 20 days prescribed by the court a quo because
this
requires the co-operation of others who were not before the court.
They rely on non-joinder in this regard. The persons who
are obliged
to complete the processes and documents to effect the s 14 transfer,
are the actuary, the trustees, the Chairperson
and the principal
officer. They are bound by the Rules of the Fund. This does not have
the consequence that they have a direct
and substantial interest of a
legal nature in these proceedings. The obligations of the actuary and
the principal officer are in
the context of s 14 only, and arise once
the Fund has been ordered to implement the s 14 transfer process. The
reason for naming
the Chairperson and principal officer in the court
order is so that they can perform the administrative functions
required of them.
They are fully aware of the proceedings and would
be obliged to comply with the order, in their respective capacities.
The Fund
contended that there are various processes and documents to
be completed in terms of Directive PF6, and that it would take a
lengthy
period of time to implement this. The Fund did not provide a
timeline to explain by when it expects that the process will be
completed
and/or why it should take more than 20 days.
The interdict
[30]
The Fund submitted that in dealing with the requisites of an
interdict, the court a quo misinterpreted the provisions of Rule
9.2.4 and fashioned a right for the employer which the employer did
not have. The employers have a clear right to enforce Rule
9.2.4 of
the Fund. We find no reason to differ with the court a quo on this
finding. The consequences of managing contributions
by members to
more than one fund is impractical and prejudicial to members.
[31]
The employers have the right, in terms of Rule 9.2.4, to insist that
the Fund give effect to their decision to transfer assets
and
liabilities of members in terms of s 14 of the Act. The Fund argued
that the employers should have followed the procedure referred
to by
Mayet J in
Sasol Limited v
Chemical Industries National Provident Fund;
[18]
they should have sought an interdict compelling the Fund to complete
the s 14 process. It is difficult to understand this argument
as this
is the precise relief which the employers sought.
[32]
The court a quo dealt with the requisites for an interdict and found
that the employers had proved same. We agree with its
conclusion. The
ground of appeal on this aspect must therefore fail.
Discretion
[33]
The Fund contended that the court a quo's order would amount to
unlawful interference with its discretion, and that the court
cannot
usurp the Board's decision. It refers in this regard to the judgment
in Sasol.
[19]
In contrast, the employers submitted that the reference to
Sasol
as authority for this
proposition is ill-conceived.
[34]
In the present case, the Fund resolved on 29 November 2018 that the
transfer would not prejudice members and that the s 14
process should
proceed. The Fund is in breach of Rule 9.2.4. The express terms of
the rules considered in
Sasol
are different to those contained
in Rule 9.2.4. More pertinently, in
Sasol,
the board of the
Chemical Industries National Provident Fund (CINPF) had not yet
determined that the s 14 transfer should proceed.
This is a
fundamental difference from the present case. Section 14 of the Act
had not yet been triggered in the
Sasol
case, as prejudice had
been raised in relation to housing loans.
[35]
Once that decision was made on 29 November 2018, the Fund was obliged
to effect the s 14 transfer by submitting the documents
to the FSCA.
The employers submitted that the member trustees have created a
situation where the Board cannot give effect to s
14. The order of
Adams J requires the individuals to do all that is necessary to
process the transfer. This obviously implies that
the Board must do
all things necessary as required in terms of s 14 and Directive PF6.
Breach
of fiduciary duties
[36]
The employers contended that failing to progress the transfers of
members who have not objected is a breach of the Fund's fiduciary
duties, in terms of s 7C of the Act, which is to the prejudice of
Fund members.
[20]
[37]
The employers further state that the member appointed trustees are in
breach of their fiduciary duties, as they consider themselves
to be
mandated by the members, and the members do not want to transfer. The
reasons for the refusal to transfer appear from the
Labour Court
judgment. From this judgment, it is evident that the reason the
members did not want to transfer was because AMCU,
the applicant in
that case, contended that its members had mandated it to have the
provident/pension fund benefits transferred
to the AMCU sponsored
IGULA retirement fund. The employers submitted that the member
trustees are advancing AMCU's interests. They
refer to the events
surrounding AMCU and IGULA's role in the delays and stated that the
outstanding objections are those which
AMCU had previously raised.
This was dealt with in detail in the Labour Court judgment. The Fund
baldly denies that they are advancing
AMCU's interests.
[38]
In
Gerson v Mondi Pension
Fund and Others,
[21]
the High Court held that,
'[T]he
trustees are not there to dispense largesse on behalf of the fund. On
the contrary, they occupy
a
strict fiduciary position
and are bound strictly to apply the rules of the fund and the PFA
when taking such decisions.'
[39]
The member elected trustees have not complied with the rules of the
Fund. In breach of their fiduciary duties, they have refused
to
support the progress of the s 14 transfer. This was proposed at both
the 18 October 2019 meeting and via the requested round-robin
resolution. In response, they stated that 'they represent the members
and have the mandate from the members not to transfer to
Old Mutual'.
This alignment with the wishes of AMCU is in breach of the Fund's
rules, and their fiduciary duty to act independently
in the interest
of all employees.
[40]
In
PPWAWU National Provident
Fund v CEPPWAWU,
[22]
the High Court stated:
'I think that the above principles
are compatible with our law and can properly be applied in the
present context. I accept that
there is nothing unlawful or improper
in the union expressing its views on issues to be decided by the
fund's trustees or even
in seeking to persuade the fund's trustees to
accept its views. However, it is in my view unlawful for the union to
seek to compel
members' trustees to "take mandates" which
they are required to implement, failing which they risk disciplinary
steps.
It is unlawful for the union to threaten disciplinary steps
against members' trustees for refusing to accept that they are
"accountable
to" the union and its members, rather than to
the fund and its members.
While it is true that
a
union
is entitled to require its employees to carry out its lawful
instructions and is entitled to require its members to comply
with
its lawful resolutions, it is not entitled to compel them to do so
where the instruction or resolution is contrary to public
policy or
otherwise unlawful. In my view the resolution in this case is
contrary to public policy and unlawful because it seeks
to interfere
with the rights of pension fund trustees to exercise their fiduciary
duties in accordance with their own independent
judgment.'
[41]
Section 7C provides for the way in which the Board is to act in
accordance with the applicable laws and the Rules of the Fund.
The
Board is to avoid conflicts of interest, and act impartially and
independently in respect of all members and beneficiaries.
[23]
[42]
The Fund is in breach of 7C(2), more particularly in light of the
FSCA's instruction to progress the s 14 transfer, and the
fact that
it continues to expose the Fund to penalties – which will be
detrimental to the members. By refusing to comply
with the Fund's
rules, which provide that the selection of retirement funds is the
applicant's sole prerogative, the member elected
trustees are in
breach of s 7C(2)(a) of the Act.
[43]
What is obvious from this matter is that the members of the fund are
being prejudiced by the Fund's stance. The members are
at present
paying duplicate administration fees, belonging to two funds. In
addition, the FSCA has stated that penalties are applicable
in
relation to the Fund's dilatory conduct in progressing the
transfer. The Fund's fiduciary duties extend to all members,
and the
Board members must avoid a conflict of interest. Although the
employee member trustees claim that they are independent
of AMCU, the
objections raised are precisely those raised by AMCU, as appears from
the Labour Court judgment. The Fund has quite
evidently done nothing
to protect the interests of those members who do not object to the
transfer, or to deal with the objections
it believes are outstanding.
[44]
In summary, the employers submitted that it is common cause that they
have the sole prerogative to direct that the transfer
take place;
second, that the Fund took the decision to proceed with the process
of the s 14 transfer on 29 November 2018, having
concluded that the
benefits remain the same, and that members would not be prejudiced;
third, that the effective date of the transfer
is 1 December 2018;
fourth, the requisite communication exercise was completed on 12 July
2019 and the 30 day period for objections
expired on 12 August 2019.
The FCSA rejected the Fund's application for an extension on 24
October 2019 and thus the Fund is in
breach of s 14 of the Act.
[45]
The appeal on all the grounds raised must fail.
Costs
[46]
In most cases, the costs order would follow the result. The employers
seek a punitive costs order. In this court's view:
46.1 In opposing the relief sought,
which is process based and allows the Fund time within which to
complete all the requirements
of s 14 and Directive PF6, is contrary
to the rules of the Fund and the Board's fiduciary duties;
46.2 It is clear from the history of
this matter that both the Chairperson and the principal officer were
previously satisfied that
such processes had been completed and that,
in their view, the Fund was in a position to submit the requisite
submission to the
FSCA. That view changed in the Fund's opposition to
the employer's application;
46.3 The Fund continued to delay the
process by failing to implement Adams J's order;
46.4 The member elected trustees are
in breach of their fiduciary duties, which breach extends to the
Fund.
46.5 By their conduct, the Fund has
acted to the substantial prejudice of all members, involving them in
paying duplicate costs
to two Funds, and subjecting them to the
possibility of penalties.
[47]
In the present case if the Fund is to be burdened with a costs order,
the members of the Fund would be further prejudiced.
We do not know
(as the Fund has evaded this question) how many members are satisfied
with the transfer and wish that it proceed
and how many object
thereto. The prejudice to the former is obvious. This court is of the
view that the principal officer, the
Chairman and the member elected
trustees have failed in their fiduciary duties and involved the Fund
in costly litigation. We therefore
require them to file affidavits,
within ten days of the grant of this order, setting out why they
should not be held personally
liable for the costs, or a portion
thereof either individually, jointly or jointly and severally.
In the result the
following order is made:
1. The appeal is dismissed;
2. The Chairperson of the Fund,
Mabatho Seeiso, the Principal Officer of the Fund, Motlatjo Seima,
and a trustee nominated by the
Chair, shall complete the relevant
documents and do all things necessary to submit the section 14
transfer documentation to the
Financial Sector Conduct Authority
('the FSCA') within 20 days from the date of this order.
3. The question of costs is reserved
for a date to be arranged with Weiner J's Registrar.
4. The principal officer, the Chairman
and the member elected trustees are to file affidavits directly with
the registrar of the
three judges hearing this matter, within ten
days of the grant of this order, setting out why they should not be
held personally
liable for the costs (or a portion thereof) of the
application and the appeal including the costs consequent upon the
employment
of two counsel;
SE WEINER
_______________________
JUDGE
OF THE HIGH COURT
GAUTENG
LOCAL DIVISION, JOHANNESBURG
_____________________
M
L SENYATSI
JUDGE
OF THE HIGH COURT
GAUTENG
LOCAL DIVISION, JOHANNESBURG
_____________________
M M P MDALANA-MAYISELA
JUDGE
OF THE HIGH COURT
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Date
of hearing: 13 February 2020
Date
of judgment: 18 March 2020
Appearances:
Counsel
for the Appellant: Adv. S Khumalo; Adv. KA Magan
Instructing
Attorneys: Soonder Incorporated
Counsel
for the Respondents: Adv. GM Goedhart SC; Adv. H Drake; Adv. LF
Molete
Instructing
Attorneys: Shepstone & Wylie Attorneys
[1]
Rule 9.2.4 of the Fund Rules; Association of Mineworkers and
Construction Union v Anglo American Platinum Ltd and Others
(J1833/18)
[2018] ZALCJHB 238 (2 July 2018);
[2018] 11 BLLR 1110
(LC) para 34.
[2]
Section 14 'Amalgamations and transfers'
(1) Subject to subsection (8), no
transaction involving the amalgamation of any business carried on by
a registered fund with
any business carried on by any other person
(irrespective of whether that other person is or is not a registered
fund), or the
transfer of any business from a registered fund to any
other person, or the transfer of any business from any other person
to
a registered fund, shall be of any force or effect unless-
(c) the scheme for the proposed
transaction, including a copy of every actuarial or other statement
taken into account for the
purposes of the scheme, has been
submitted to the registrar within a prescribed period of the
effective date of the transaction;
(d) the registrar has been furnished
with such additional particulars or such a special report by a
valuator, as he may deem necessary
for the purposes of this
subsection;
(e) the registrar is satisfied that
the scheme referred to in paragraph (a) is reasonable and equitable
and accords full recognition-
(i) to the rights and reasonable
benefit expectations of the members transferring in terms of the
rules of a fund where such rights
and reasonable benefit
expectations relate to service prior to the date of transfer;
(ii) to any additional benefits in
respect of service prior to the date of transfer, the payment of
which has become established
practice; and
(iii) to the payment of minimum
benefits referred to in section 14A,
and that the proposed transactions
would not render any fund which is a party thereto and which will
continue to exist if the
proposed transaction is completed, unable
to meet the requirements of this Act or to remain in a sound
financial condition or,
in the case of a fund which is not in a
sound financial condition, to attain such a condition within a
period of time deemed
by the registrar to be satisfactory;
(f) the registrar has been furnished
with such evidence as he may require that the provisions of the said
scheme and the provisions,
in so far as they are applicable, of the
rules of every registered fund which is a party to the transaction,
have been carried
out or that adequate arrangements have been made
to carry out such provisions at such times as may be required by the
said scheme;
(g) the registrar has forwarded a
certificate to the principal officer of every such fund to the
effect that all the requirements
of this subsection have been
satisfied.
[3]
Sasol Limited v Chemical Industries National Provident Fund
(2061212014)
[2015] ZASCA 113
(7 September 2015) para 16 states,
'... s 14 does not regulate the transfer of members but the transfer
of assets and liabilities
of members. Members do not, strictly
speaking, transfer between funds. They withdraw from one and join
another.'
[4]
Paragraph 3 of Directive PF6 titled 'Member Communication' sets out
as follows:
'3.1 As part of the communication
exercise, transferring members must be provided with their transfer
values, or reasonable estimates
thereof, as at the effective date of
transaction. Furthermore, members must be given sufficient
information about the transfer
so as to ensure that they can make an
informed choice.
3.2 In all cases other than for
voluntary individual transfers, members must be given at least 30
days in which to lodge an objection,
if any, to a transfer.'
[5]
Rule 49(18) provides that, 'Notwithstanding the provisions of this
rule the judge president may, in consultation with the parties
concerned, direct that a contemplated appeal be dealt with as an
urgent matter and order that it be disposed of, and the appeal
be
prosecuted, at such time and in such manner as to him seems meet.'
[6]
Section 14(1)(c) of the Act provides:
(c) the registrar is satisfied that
the scheme referred to in paragraph (a} is reasonable and equitable
and accords full recognition-
(i) to the rights and reasonable
benefit expectations of the members transferring in terms of the
rules of a fund where such rights
and reasonable benefit
expectations relate to service prior to the date of transfer;
(ii) to any additional benefits in
respect of service prior to the date of transfer, the payment of
which has become established
practice; and
(iii) to the payment of minimum
benefits referred to in section 14A,
and that the proposed transactions
would not render any fund which is a party thereto and which will
continue to exist if the
proposed transaction is completed, unable
to meet the requirements of this Act or to remain in a sound
financial condition or,
in the case of a fund which is not in a
sound financial condition, to attain such a condition within a
period of time deemed
by the registrar to be satisfactory;
[7]
Paragraph 18 of Directive PF6 titled 'Satisfaction of rights and
reasonable benefit expectations' provides as follows:
'18.1 The board of the fund and the
valuator must express an opinion on whether the transfer satisfies
the rights and reasonable
benefit expectations of members and must
indicate as such when the forms are completed.
18.2 The Registrar will not accept
modifications to the opinion prescribed in the forms since it
negates the fiduciary responsibility
of the board of the fund and
the valuator to the stakeholders in a fund, unless such modification
is adequately motivated.'
[8]
Association of Mineworkers and Construction Union v Anglo American
Platinum Ltd and Others (J1833/18) [2018] ZALCJHB 238 (2 July
2018);
(2018) 39 ILJ 2280 (LC).
[9]
Ibid paras 30-45, see para 34 specifically. In this case, AMCU
sought to interdict the transfer of the employees from the Fund
to
Old Mutual. At para 44, the Labour Court concluded that, 'Rusplats
[the employer, being the second respondent in this instance]
retains
the prerogative in terms of the contracts of employment of each of
the union's members to determine the provident fund
to which its
employees are required to belong. That being so, Rusplats did not
breach the terms of the contracts when it required
the union's
members to join Old Mutual.'
[10]
South African Municipal Workers' Union National Provident Fund v
Umzimkhulu Local Municipality and Others (297/2018)
[2019] ZASCA 41
(29 March 2019) para 42-48. At para 42 the SCA stated that, '...that
the compulsory membership of a pension fund which only holds
financial implications for a member, does not constitute a
limitation on the right to freedom of association.'
[11]
Nichol and Another v Sage Schachat Pension Fund and Others [2002] 3
BPLR 3230 (PFA) para 19 states as follows: 'It is trite law
that the
provisions of the Act override the rules of a fund in the event of
any conflict.'
[12]
Sasol Limited v Chemical Industries National Provident Fund
(20612/2014)
[2015] ZASCA 113
(7 September 2015).
[13]
Ibid para 13.
[14]
Labour Court judgment (note 8 above).
[15]
Rosebank Mall (Pty) Ltd and Another v Cradock Heights (Pty) Ltd 2004
(2) SA 353 (W).
[16]
City of Johannesburg and Others v South African Local Authorities
Pension Fund and Others (2015) 36 ILJ 1439 (SCA).
[17]
Labour Court judgment (note 8 above).
[18]
Chemical Industries National Provident Fund v Sasol Limited v Fund
2014 (4) SA 205
(GJ) para 52
[19]
Sasol v Chemical Industries National Provident Fund (note 12 above)
[20]
Section 7C of the Act titled 'Object of board' provides:
(1) The object of a board shall be to
direct, control and oversee the operations of a fund in accordance
with the applicable laws
and the rules of the fund.
(2) In pursuing its object the board
shall-
(a) take all reasonable steps to
ensure that the interests of members in terms of the rules of the
fund and the provisions of
this Act are protected at all times,
especially in the event of an amalgamation or transfer of any
business contemplated in section
14, splitting of a fund,
termination or reduction of contributions to a fund by an employer,
increase of contributions of members
and withdrawal of an employer
who participates in a fund;
(b) act with due care, diligence and
good faith;
(c) avoid conflicts of interest;
(d) act with impartiality in respect
of all members and beneficiaries;
(e) act independently;
(f) have a fiduciary duty to members
and beneficiaries in respect of accrued benefits or any amount
accrued to provide a benefit,
as well as a fiduciary duty to the
fund, to ensure that the fund is financially sound and is
responsibly managed and governed
in accordance with the rules and
this Act; and
(g) comply with any other prescribed
requirements.
[21]
Gerson v Mondi Pension Fund and Others
2013 (6) SA 162
(GSJ) para
27.
[22]
PPWAWU National Provident Fund v Chemical, Energy, Paper, Printing,
Wood and Allied Workers Union (CEPPWAWU)
[2007] ZAGPHC 146
;
2008 (2) SA 351
(W) paras
37-38.
[23]
Section 7C of the Act (see note 23 above).