Brief Summary

Pension Funds — Review of Adjudicator's Determination — Application to review and set aside a determination made by the Pension Funds Adjudicator regarding the calculation of a withdrawal benefit. The Municipal Employees Pension Fund and Akani Retirement Fund Administrators challenged the Adjudicator's decision that ordered payment based on the Old Rule, asserting that the Amended Rule should apply retrospectively. The legal issue centered on whether the Adjudicator had jurisdiction to make the determination and whether the Amended Rule was applicable to the First Respondent's withdrawal benefit. The court held that the Adjudicator's determination was lawful and within her jurisdiction, and the Amended Rule could not be applied retrospectively to benefits accrued prior to its approval.

Comprehensive Summary

Summary of Judgment

1. Introduction

This matter concerned an application in the Gauteng Division of the High Court, Johannesburg, to review and set aside a determination of the Pension Funds Adjudicator. The application was brought primarily under section 30P of the Pension Funds Act 24 of 1956, alternatively under the Promotion of Administrative Justice Act 3 of 2000 (PAJA).

The first applicant was the Municipal Employees Pension Fund (the fund), and the second applicant was Akani Retirement Fund Administrators (Pty) Ltd (the fund administrator). The first respondent was Mr Matome Ronald Ramohale, a former municipal employee and fund member. The second respondent (the employer municipality) was the City of Ekurhuleni Metropolitan Municipality, cited for its interest but with no substantive relief sought against it. The third respondent was the Pension Funds Adjudicator, cited in her official capacity.

The dispute arose from the Adjudicator’s determination dated 30 January 2018, which upheld Mr Ramohale’s complaint and directed the fund to pay him a higher withdrawal benefit calculated under the fund’s earlier rule structure, together with interest. The applicants sought condonation for a late section 30P application, and substantive relief setting aside and substituting the Adjudicator’s determination with an order dismissing the complaint.

The subject-matter concerned the calculation of a member’s withdrawal benefit following resignation, in circumstances where the fund had amended its rules with retrospective effect, and where the Adjudicator concluded that the retrospective amendment could not apply to members who exited before the Registrar’s approval and registration date.

2. Material Facts

Mr Ramohale was employed by the City of Ekurhuleni Metropolitan Municipality from 6 September 2006 until his resignation on 15 May 2013. By virtue of his employment, he became a member of the Municipal Employees Pension Fund and ceased to be a member upon payment of his withdrawal benefit on 5 August 2013.

At the time Mr Ramohale became a member, the fund’s Rule 37(1) (referred to in the judgment as the Old Rule) provided that a member who left service early would receive a withdrawal benefit calculated at three times the value of the member’s contributions.

Following advice in February 2013 from the fund’s actuaries (Itakane Actuaries and Consultants (Pty) Ltd), the fund concluded that the Old Rule imposed a significant financial strain and placed the fund at risk of failing to meet its liabilities. The fund resolved on 21 June 2013 to amend the Old Rule with retrospective effect from 1 April 2013. The amendment (the Amended Rule) reduced the withdrawal multiple from three times contributions to 1.5 times the member’s own contributions.

The fund applied to the Registrar on 22 July 2013 for approval of the amendment in terms of section 12(2) of the Pension Funds Act, with effect from 1 April 2013, and members and affected municipalities were notified between July and October 2013. The Registrar approved and registered the amendment on 1 April 2014, with an effective date of 1 April 2013. The Amended Rule remained in force and had not been challenged in proceedings directed at the Registrar’s approval decision.

After receiving his withdrawal benefit in August 2013, Mr Ramohale complained that the payment was not calculated in accordance with a projection statement he had previously received. He contended he expected R264 347.99 but received R132 173.00 (approximately half). He lodged a complaint with the Adjudicator on 16 September 2014.

The Adjudicator upheld the complaint and ordered the fund to pay the difference (and interest), on the basis that the Amended Rule could not be applied to exits prior to the Registrar’s approval date and could not affect benefits said to have “accrued” before that approval. The Adjudicator’s conclusion effectively applied the Old Rule to Mr Ramohale’s benefit despite the Registrar’s registration of the amendment with retrospective effect.

The applicants challenged that determination. They also sought condonation because the determination was made known to them on 19 February 2018, and although section 30P required an application within six weeks (by 2 April 2018), the application was filed only on 27 July 2018.

3. Legal Issues

The court identified several central questions requiring determination.

A primary issue was whether the Pension Funds Act conferred jurisdiction on the Adjudicator to make a determination that, in effect, treated a registered rule amendment as non-retrospective for certain members and thereby regulated how the rule would apply in time. This issue turned on statutory power and the lawful scope of the Adjudicator’s functions, and therefore principally concerned law and the application of law to established facts.

A further issue was whether the Adjudicator erred by failing to give effect to an amendment made with retrospective effect, which the applicants contended the fund was entitled to implement under section 12(4) of the Pension Funds Act once approved and registered by the Registrar. This required assessing the legal effect of registered fund rules and the respective roles of the Registrar and the Adjudicator.

The court also had to decide whether the determination was procedurally unfair, in that the Adjudicator decided the complaint on the basis that the amendment could not apply retrospectively (as she understood it), without affording the applicants an opportunity to address her on that decisive point. This involved the application of administrative-law fairness principles to the decision-making process.

Additional issues included whether the Amended Rule was said to be unlawful by reason of an alleged conflict with section 37A of the Pension Funds Act and Rule 48 of the fund rules, and whether the deponent to the applicants’ affidavits (Mr Letjane) had authority to depose to those affidavits. The court also had to decide whether condonation should be granted for non-compliance with the section 30P time period, which involved an evaluative discretionary assessment informed by interests of justice, explanation for delay, prospects, and importance.

4. Court’s Reasoning

The court began from the statutory setting that registered pension funds are governed by the Pension Funds Act together with their registered rules, and that, subject to the Act, the rules are binding on the fund and members under section 13. Within this framework, Rule 37 governed resignation/withdrawal benefits, and Rule 48 governed amendment of rules subject to section 12 of the Act.

On jurisdiction, the court emphasised that the Adjudicator’s powers derive from the Act (including section 30A(3)), and that she is a “creature of statute”. The court accepted that the Adjudicator had concluded that the Amended Rule could not apply to members who left prior to the Registrar’s approval date, with the effect that the Amended Rule operated only prospectively for such members. The court characterised that approach as “venturing into an arena” not intended by the legislature, reasoning that it is for the fund (acting through its rule-making powers) to amend rules, and for the Registrar, as regulator, to approve and register amendments (including their effective date) and intervene if something is untoward. In this matter, the Registrar registered the Amended Rule with effect from 1 April 2013, and the court treated that registration as decisive as to the amendment’s operative date for purposes of the fund’s governance. The court relied on authority indicating that the Adjudicator lacks jurisdiction to determine whether a rule applies prospectively (the judgment specifically referred to Joint Municipal Pension Fund and Another v Grobler and Others), and also referred to the Adjudicator’s statutory nature as described in Shell and BP South Africa Petroleum Refineries (Pty) Ltd v Murphy NO and Others.

Regarding the respondent’s argument that the Registrar’s approval and the Amended Rule were invalid due to conflict with section 37A of the Act and Rule 48, the court rejected that contention. It read Rule 48(1) as conferring power to amend the rules, qualified only by consistency with section 12 of the Act. The court found that section 12 does not preclude amendments that reduce benefits; rather, its restrictions relate to prejudice to creditors’ rights and the requirement of Registrar approval and registration. The court noted there was no evidence that the amendment affected creditors’ rights, and further observed that any challenge premised on creditor prejudice would have required a challenge to the Registrar’s registration decision, which had not occurred.

The court interpreted section 37A as aimed at protecting members’ benefits against external claims by creditors, preventing cession, pledge, hypothecation, attachment, or execution, subject to limited statutory exceptions. On this interpretation, the prohibition on “reduction” in section 37A was not understood as preventing a fund from amending its rules to adjust the benefit formula; it was understood as preventing reductions in consequence of external processes such as execution. In support of that interpretive approach, the court referred to National Testing Retirement Fund v Registrar of Pension Funds, which held that a rule amendment reducing benefits does not fall foul of section 37A because the section targets reductions arising from factors external to the rules. The court also reasoned, as part of its assessment of the respondent’s section 37A argument, that the legislature could not have intended to compel adherence to an unsustainable calculation formula where it would lead to the collapse of the fund. It further accepted the applicants’ case that the trustees owed fiduciary duties to ensure fund sustainability for the benefit of all members, and that actuarial advice motivated the amendment.

On the point that the deponent (Mr Letjane) allegedly lacked authority, the court applied settled principles that authority to depose to an affidavit is not the relevant inquiry; the essential question is whether the attorney is authorised to act, and challenges to authority should be raised via Rule 7(1). The court relied on Eskom v Soweto City Counsel for the proposition that it is unnecessary to prove that a particular deponent is authorised to “bring” the application, provided the litigation is authorised through the attorney, and it noted that no Rule 7 notice was delivered. It also found that Mr Letjane, as managing director of the fund administrator since 2003, had personal knowledge of the facts.

On procedural fairness, the court accepted the applicants’ submission that they were not informed that the Adjudicator would determine the complaint on the basis that the amendment could not apply to members who exited before the Registrar’s approval date, and that they were not afforded an opportunity to address that decisive issue. The court considered that once the Adjudicator embarked on a determination concerning the validity or temporal application of the registered amendment, she went beyond simply resolving the complaint as defined, and she was obliged to invite submissions before deciding the point. The court held that the failure to afford the right to be heard constituted a serious irregularity and rendered the determination vulnerable as procedurally unfair under section 6(2)(c) of PAJA.

On condonation, the court noted the statutory six-week period in section 30P and the applicants’ delay. It weighed factors relevant to “good cause” and the interests of justice, including the explanation for the delay and the importance of the issue. The court took into account that the Adjudicator took approximately three years and four months to determine the complaint, the applicants’ explanation that time was needed to locate the file, and, materially, the stated importance of the matter for the fund’s sustainability. The court concluded that if the determination stood, it would affect the fund’s sustainability, and that this consideration favoured granting condonation.

5. Outcome and Relief

The court granted condonation for the late filing of the section 30P application.

It held that the Pension Funds Adjudicator had no jurisdiction to make the determination dated 30 January 2018 in respect of Mr Ramohale’s complaint. The determination was reviewed and set aside and declared invalid and of no force and effect.

The court substituted the Adjudicator’s determination with an order dismissing Mr Ramohale’s complaint, and it upheld the appeal under section 30P.

The court ordered the first respondent to pay the costs of the appeal.

Cases Cited

Mostert N.O. v Old Mutual Life Assurance Company (South Africa) Ltd [2001] 8 BPLR 2307 (SCA)

IEK Corporation Provident Fund and Others v Lorentz [2003] 3 BPLR 227 (SCA)

National Director of Public Prosecutions v Carolus and Others 2000 (1) SA 1127 (SCA)

Shell and BP South Africa Petroleum Refineries (Pty) Ltd v Murphy NO and Others 2001 (3) SA 683 (D) at 690A

Joint Municipal Pension Fund and Another v Grobler and Others 2007 (5) SA 629 (SCA) para 25

National Testing Retirement Fund v Registrar of Pension Funds 2009 (5) SA 366 (SCA) paras 22–23

Eskom v Soweto City Counsel 1992 (2) SA 703 (W) at 705E

Ganes v Telecom Namibia Limited [2004] 2 All SA 609 (SCA) para 19

ANC Umvoti Council Caucus v Umvoti Municipality 2010 (3) SA 31 (KZP) paras 27–27

Barclays National Bank Ltd v Love 1975 (2) SA 514 (D) at 515C–E and 515F–G

Samancor Group Pension Fund v Samancor Chrome 2010 (4) SA 540 (SCA)

Ferris v FirstRand Bank Limited 2014 (3) SA 39 (CC) para 10

Legislation Cited

Pension Funds Act 24 of 1956, including sections 11, 12, 13, 30A(3), 30P, 30M, 37A, and 37D

Promotion of Administrative Justice Act 3 of 2000, including section 6(2)(c)

Income Tax Act 58 of 1962 (referenced within section 37A)

Maintenance Act 1998 (referenced within section 37A)

Section 79(5) of the Ordinance (as referenced in Rule 48 of the fund rules)

Rules of Court Cited

Uniform Rule of Court 7(1)

Held

The court held that the Pension Funds Adjudicator exceeded her statutory competence by determining that a duly registered rule amendment (registered by the Registrar with a retrospective effective date) could not apply to members who exited before the Registrar’s approval date. This was treated as an impermissible determination of the temporal operation of fund rules, a matter not within the Adjudicator’s jurisdiction as a statutory functionary.

The court further held that the Adjudicator’s approach was procedurally unfair because the applicants were not afforded an opportunity to make submissions on the decisive issue that the Adjudicator relied upon, rendering the determination reviewable under PAJA for procedural unfairness.

It also held that the respondent’s reliance on section 37A of the Pension Funds Act and Rule 48 of the fund rules to attack the validity of the rule amendment was misconceived, because section 37A protects benefits against creditors and does not prohibit benefit reductions brought about by rule amendment, and Rule 48 permits amendments subject to section 12 of the Act.

Finally, the court held that a challenge to authority to depose to affidavits was unsustainable on the facts and law applied, and that condonation should be granted in light of the interests of justice and the importance of the matter to the fund’s sustainability.

LEGAL PRINCIPLES

Registered pension funds are governed by the Pension Funds Act 24 of 1956 and their registered rules, and (subject to the Act) those rules are binding on the fund and its members in terms of section 13.

A fund may amend its rules in accordance with section 12 of the Act, provided the amendment is approved and registered by the Registrar and does not purport to affect a creditor’s right (other than as member or shareholder). Section 12 does not, on the court’s reading, preclude amendments that have the effect of reducing benefits, provided the statutory requirements are met.

Section 37A of the Pension Funds Act is directed at protecting pension benefits from external interference such as cession, pledge, hypothecation, attachment, or execution by creditors, and does not prohibit a reduction arising from a rule amendment altering the benefit formula, as supported by National Testing Retirement Fund v Registrar of Pension Funds 2009 (5) SA 366 (SCA).

The Pension Funds Adjudicator, as a statutory office-holder, has only those powers conferred by the Pension Funds Act and does not have jurisdiction to regulate how fund rules apply in time by effectively rendering a registered amendment prospective only; the Registrar’s registration of a rule amendment (including its effective date) is central to the rule’s operative effect within the fund’s governance framework.

Administrative-law fairness requires that parties be afforded an opportunity to be heard on issues that are decisive to the outcome. A determination taken without giving affected parties such an opportunity is procedurally unfair and reviewable under section 6(2)(c) of PAJA.

In relation to authority, the relevant focus is whether litigation is authorised through the attorney acting for the litigant, and challenges to authority should be raised through Uniform Rule 7(1); it is not generally necessary to establish that a particular deponent was separately authorised to depose to an affidavit or “bring” an application.

Municipal Employees Pension Fund and Another v Ramohale and Others (27708/18) [2022] ZAGPJHC 164 (18 March 2022)