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[2013] ZASCA 175
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City of Cape Town Municipality v South African Local Authorities Pension Fund and Another (175/2013) [2013] ZASCA 175; 2014 (2) SA 365 (SCA) (28 November 2013)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 175/2013
Reportable
In
the matter between:
CITY
OF CAPE TOWN MUNICIPALITY
………………………………………
APPELLANT
and
SOUTH
AFRICAN LOCAL AUTHORITIES
PENSION
FUND
……………………………………………………
..
FIRST
RESPONDENT
REGISTRAR
OF PENSION FUNDS
…………………………
.
SECOND
RESPONDENT
Neutral
citation
:
City
of Cape Town Municipality
v
SA
Local Authorities Pension Fund
(175/2013)
[2013] ZASCA 175
(28 November 2013)
Coram
:
Mthiyane
AP, Bosielo, Wallis, Pillay JJA and Zondi AJA
Heard
:
8 November 2013
Delivered
:
28 November 2013
Summary: Scope of jurisdiction of
Pension Funds Adjudicator to determine and investigate a complaint
where proceedings have been
instituted in the high court relating to
the same subject matter lodged with the Adjudicator —
Adjudicator’s jurisdiction
excluded by
s 30H(2)
of the
Pension
Funds Act 24 of 1956
.
ORDER
On appeal from:
Western
Cape High Court, Cape Town (Griesel J sitting as court of first
instance):
‘
The
appeal is dismissed with costs’
JUDGMENT
Mthiyane
AP (Bosielo, Wallis, Pillay JJA and Zondi AJA concurring):
[1]
This
is an appeal against a judgment and order of the Western Cape High
Court (Griesel J) in which the court a quo dismissed an
appeal in
terms of s 30P of the Pension Funds Act 24 of 1956 (the Act) against
a determination of the Acting Pension Funds Adjudicator
(the
Adjudicator). The appeal is with the leave of the court a quo.
Section 30P of the Act provides that a party who is aggrieved
by a
determination of the Adjudicator may apply to the division of the
high court which has jurisdiction, for relief, and the high
court may
then consider the merits of the complaint made to the Adjudicator
under s 30A(3) and may make any order it deems fit.
[2]
The
appellant (the City) lodged a complaint with the Adjudicator in terms
of s 30A of the Act, against the conduct and administration
of the
first respondent (the fund).
[1]
The complaint arose from a dispute between
the
City and the fund, concerning increased employer contributions from
the City (at a rate of 20.78 per cent of member’s
salaries) on
an on-going, indefinite basis. The fund claimed that it was entitled
to exact increased employer contributions from
the City. The City
contended that it was only obliged to pay the increased contributions
for a 5 year period between July 2003
and July 2008, whereafter the
required contribution rate reverted to 18.07 per cent.
[3]
As
a consequence of its contention that it was only obliged to pay the
enhanced contribution until July 2008, the City reverted
to paying
contributions at the lower rate from July 2008. In response the fund
instituted an action before the high court to recover
the alleged
shortfall in contributions. The City defended the action and asserted
that the increased contribution rate had been
unlawfully imposed and
that it was not obliged to pay contributions at the higher level. The
complaint was only lodged with the
Adjudicator after the action had
been underway for two years.
[4]
In
her determination of the dispute, the Adjudicator found that she did
not have jurisdiction to investigate and determine the City’s
complaint by virtue of the provisions of s 30H(2) of the Act. Griesel
J upheld this finding without going into the merits as he
did not
consider it necessary to do so. The merits of the complaint had
similarly not been considered by the Adjudicator.
[5]
Accordingly
the issue to be determined in this appeal is whether the Adjudicator
was precluded, by virtue of the provisions of s
30H(2), from
investigating and determining the City’s complaint under s 3OP
of the Act. Section 30H(2) reads as follows:
‘
The
Adjudicator shall not investigate a complaint if, before the lodging
of the complaint, proceedings have been instituted in any
civil court
in respect of a matter which would constitute the subject matter of
the investigation.’
[6]
Before
discussing the above issue it is helpful to briefly set out the
nature, ambit and scope of the fund and its operations and
the
circumstances in which the dispute between the parties arose. The
fund is a defined benefit fund which undertakes to provide
its
members — the employees of the City amongst others — with
the benefits defined in its rules. It is funded partly
by members and
partly by employer contributions.
[7]
The
fund is a juristic person which is controlled by a board
[2]
composed
of employees and employer representatives in equal proportions. Rule
2.1.3 of the rules vests the trustees with the power
by resolution,
to amend the rules, provided no amendment to the rules of the fund
may be made unless the amendment has been approved
by the second
respondent (the Registrar). The amount, if any, to be paid by the
employer has to be determined by the fund’s
trustees from time
to time, but it cannot be less than an amount calculated by the
fund’s actuary. This, to ensure that the
fund is financially
sound and able to provide the benefits for which has undertaken
liability under the rules. In terms of rule
4.2.2.2, the rate of the
employers’ contribution is subject to review at each actuarial
investigation — ordinarily
every three years.
[8]
Rule
4.5 provides that if at any time the balances in the accounts of the
fund are in the opinion of the valuator insufficient to
provide the
benefits in terms of the
rules, the valuator in consultation with the trustees, must require
an additional employer contribution
at such times and in such amounts
as the valuator and the trustees decide; an increase in the future
rate of employer and member
contributions; or reduction in the future
benefits; or any combination of these alternatives.
[9]
Section
16 of the Act requires the fund to cause its financial condition to
be investigated and reported on at least once every
three years by
its valuator appointed in terms of s 9A(1) of the Act. If such a
report indicates in the opinion of the Registrar,
that the fund is
not in a sound financial condition, the Registrar must in terms of s
18 of the Act direct the fund to submit to
him a scheme setting out
the arrangements which it intends to make as to bring the fund into a
financially sound condition within
a reasonable time. If the
Registrar approves the scheme in terms of s 18(2), then in terms of s
18(4) of the Act, the fund is obliged
to implement it. However the
Registrar may withdraw his approval and require the fund to submit a
new scheme if any return deposited
during the currency of the scheme
is unlikely to achieve its objective.
[10]
On
20 August 2003 the board passed a resolution making a number of
alternations to the rules. The one that is an issue in this
proceeding is an amendment to rule 4.2.2.1 (B) which had the effect
of increasing participating employers’ contribution from
18.07
per cent to 20.78 per cent of the salary. On 28 October 2003 the fund
lodged an application to amend its rules including
the increase of
employer contributions. This resolution was duly transmitted to the
Registrar. After various exchanges between
the fund and the
Registrar, an amended version of the resolution was submitted in May
2006 and approved by the Registrar in terms
of s 12(4) of the Act on
5 July 2006, with effect from 1 July 2003.
[11]
It
is this resolution and the amendment of the rule that triggered the
City’s complaint that was the subject of the complaint
to the
Adjudicator and subsequently, the appeal before the court a quo in
terms of s 3OP of the Act. The City avers that it was
at the time not
aware of the steps taken by the fund to amend its rules. In
particular it was not aware that the fund intended
to pass a
resolution in such terms. It felt aggrieved at not being afforded an
opportunity to make representations to the fund
in respect of the
proposed amendment. Nor did it agree to a resolution in such terms.
[12]
The
City also complains that in its letter of 21 February 2004 to the
Registrar the fund’s valuator represented that the fund
had
reached an agreement with SALGA concerning the requested increase in
employer contributions — a representation which
was, in the
view of the City, false. There were thereafter various exchanges
which culminated in a circular
dated
17 January 2005 in which WECLOGO
[3]
advised the municipalities to pay the requested increase, even though
there was no agreement between SALGA
[4]
and the fund.
[13]
Following
the above advice, the City took a decision in or about May 2005 to
pay the increased contributions; and instructed the
council as
follows:
‘
It
recommended that:
10.1
the
council increase its current contributory rate to SALA Pension Fund
by an additional 2.71 per cent of the members’ pensionable
salaries, effective from 2003- 07-01;
10.2
such
increase rates apply for the next 5 years or earlier, if the fund
reaches a position of financial soundness before then.’
The
City implemented its decision with immediate effect, backdated from 1
July 2003.
[14]
At
the time the City implemented the increase the rule amendment
containing the increased employer contributions had not yet been
approved by the Registrar. The amendment was only approved on 5 July
2006, with retrospective effect. The City says it was unaware
at the
time, of the fund that the rule amendment had been sought by the
funds, or that it had been approved by the Registrar. The
City also
avers that it was unaware that an amendment to the rules was
contemplated in terms whereof the increase would have no
limitation
as to time, or that such amendment would be sought on the basis of a
resolution apparently adopted by the fund almost
three years
previously. The City avers that it was not given the opportunity of
making representations to the fund or to the Registrar
relating to an
amendment of this type.
[15]
The
City ceased paying the increased employer contributions with effect
from July 2008. From this date the City reverted to the
rate of 18.07
per cent, which gave rise to further disputes.
[16]
On
4 May 2009, the fund addressed a letter to the City in response to
its reversion to the pre-amendment rate. It expressed the
view that
the increased rate was not limited to a 5 year period or any period
at all but was binding indefinitely.
[17]
The
fund subsequently instituted proceedings in 2009 against the City in
the court a quo for payment of the increased contribution
amount from
1 July 2008 to date. The City asked the court a quo to hold the
matter in abeyance pending the outcome of the complaint
it lodged
with the Adjudicator in November 2011.
[18]
The
fund’s decision to effect the increase of employer
contributions is attacked on various grounds. The City contends that
the power of the fund to effect the increase to the employer
contributions cannot be viewed in isolation. It avers that that power
is inextricably bound up with the revised scheme in terms of which
(a) the contributing employers’ consent to the increase
was
required and (b) the increase would be limited to a maximum of 5
years from 1 July 2003 until 1 July 2008.
[19]
The
fund is accused of acting in bad faith in that it was not entitled to
unilaterally extend the period of increased contributions
beyond the
period specified in the revised scheme and beyond that which had been
agreed to with the contributing employers.
[20]
Relying
on s 30H(2) the Adjudicator refused to entertain the complaint,
holding that she had no jurisdiction to hear and determine
the
complaint as action had been instituted in the court a quo based on
the same complaint.
[21]
In
this appeal this court is required to consider the scope of the
exclusion of the Adjudicator’s jurisdiction under s 30H(2)
of
the Act. That section provides, as I have already mentioned, that an
Adjudicator shall not investigate a complaint if, before
the lodging
of the complaint, proceedings have been instituted in any civil court
in respect of a matter which would constitute
the subject matter of
investigation.
[22]
The
contention on behalf of the City was that the purpose of the section
is to prevent forum shopping by a complainant by preventing
it in
certain circumstances from having a choice of forum in which to
pursue its complaint. It then contended that the proceedings
instituted in any civil court under this section had to be
proceedings instituted by the complainant, presumably on the basis
that it would be the party that would otherwise be able to engage in
forum shopping. If so it is a remarkably ineffectual instrument
to
achieve that purpose. After all the complainant would still be
entitled to engage in forum shopping at the stage when it was
deciding whether to go to court or to lodge a complaint with the
Adjudicator. If the idea was to avoid forum shopping then the
simple
way to do so was to make it obligatory to lodge a complaint with the
Adjudicator, leaving the court to intervene later under
s 3OP.
[23]
It
is not clear, even after the argument, whether the submission went
further and contended that there had to be an almost complete
identity between the issues. The argument in reply was directed at
suggesting that, whilst they were intertwined, they were not
co-extensive.
[24]
The
proper approach to interpretation is that laid down in Natal Joint
Municipal Pension Fund v Endumeni Municipality
2012 (4) SA 593
(SCA)
and this is not disputed. If one starts, as one must necessarily do,
with the language there are two points that can be noted.
The first
is that s 30H(2) does not expressly require that the complainant
should have been the plaintiff or the applicant in the
proceedings
instituted in the court. That is plain from the wording of the
section. The second is that it does not require the
proceedings in
the civil court to be proceedings concerning ‘the complaint’.
The language used is rather wider in saying
that the proceedings in a
civil court are proceedings ‘in respect of a matter which would
constitute the subject matter of
the investigation’.
[25]
In
regard to the background of the section and its context it is
important to look at the purpose for which Chapter VA, which deals
with the office of the Pension Funds Adjudicator, was introduced into
the Act. The aim was to give members of the pension fund
and others a
means of complaining about the administration of the funds and their
treatment by the funds, which was inexpensive,
informal and
expeditious. Under s 30A provision is made for a complainant to lodge
a complaint with the fund, and if not satisfied
with the reply, which
has to be furnished within 30 days, to refer the complaint to the
Adjudicator. Under s 1(1) a complainant
is defined so as to include
members and former members of a fund, beneficiaries and former
beneficiaries of a fund, employers who
participate in a fund, a board
of a fund or a member of a board or any interested person.
[26]
The
definition of a complaint is important. It means:
‘
A
complaint of a complainant relating to the administration of a fund,
the investment of its funds or the interpretation and application
of
its rules, and alleging —
(a)
that
a decision of the fund or any person purportedly taken in terms of
the rules was in excess of the powers of that fund or person,
or an
improper exercise of its powers;
(b)
that
the complainant has sustained or may sustain prejudice in consequence
of the maladministration of the fund by the fund or any
person,
whether by act or omission;
(c)
that
a dispute of fact or law has arisen in relation to a fund between the
fund or any person and the complainant; or
(d)
that
an employer who participates in a fund has not fulfilled its duties
in terms of the rules of the fund;
but
shall not include a complaint which does not relate to a specific
complainant.’
[27]
In
Shell
and BP South African Petroleum Refineries (Pty) Ltd v Murphy NO &
others
2001 (3) SA 683
(D) at 690E-H Levinsohn J said:
‘
In
s 30D of the Act the adjudicator is charged with the duty of
disposing of complaints in a procedurally fair, economical and
expeditious manner. Despite this, however, he nevertheless performs
the same function which a court of law would perform had such
court
been seized of the matter. The Adjudicator accordingly does not
possess a general equitable jurisdiction. There are indications
in
various sections of the Act which point to this. For example s 30E(1
)(a) states “that the Adjudicator shall investigate
any
complaint and may make the order which any court may make”.
Section 30H(2) does not permit an Adjudicator to investigate
a
complaint where proceedings have already been instituted in a civil
court. Section 30H(3) and s 301 provide that proceedings
before the
Adjudicator are equated to the commencement of an action which would
interrupt the running of prescription. Finally,
s 30M requires the
Adjudicator to lodge his determination with the clerk or Registrar of
the court “which would have had
jurisdiction had the matter
been heard by a court”. Section 300 of the Act deems a
determination by the Adjudicator to be
a civil judgment of any court
of law “had the matter in question been heard by such court”.’
That
passage was cited with approval by Howie P in this Court in Joint
Municipal Pension Fund & another v Grobler & others
2007 (5)
SA 629
(SCA) para 25.
[28]
It
follows that the purpose of s 30H(2) was not to prevent forum
shopping as suggested by the City. It was part of an overall scheme
in which disputes about pension funds that could otherwise only be
resolved in the then Court of Supreme, (now the High Court)
unless
there were monetary claims for relatively small amounts of money,
would be dealt with informally, cheaply and expeditiously.
(It is
worth noting in that regard that under s 3OK no party is entitled to
legal representation at proceedings before the Adjudicator.)
In other
words the system for resolving complaints established under chapter
VA is a system for resolving disputes that would otherwise
have to be
dealt with in the courts. Disputes do not, however, lose their legal
character by being referred to the Adjudicator
as complaints. Nor are
aggrieved parties deprived of their right to access to courts, a
right to which is guaranteed in terms of
s 34 of the Constitution.
This is illustrated by s 30P of the Act which provides that any party
who is aggrieved by determination
of the Adjudicator may apply to the
division of the high court. The high court will then consider the
merits of the complaint and
my make any order it deems fit. Under s
30P(3) the high court can then decide whether sufficient evidence has
been adduced on which
a decision can be made. In Meyer v Iscor
Pension Fund
2003 (2) SA 715
(SCA) para 8 it was held that the appeal
under s 3OP is a complete rehearing and a fresh determination on the
merits of the matter
with or without additional evidence or
information. Accordingly an aggrieved party is entitled to have the
legal dispute that was
dealt with by the Adjudicator reconsidered de
novo by the court.
[29]
Section
30H(2) must be seen against this background. Its purpose was and is
to deal with the fact that civil courts, usually the
high court, and
the adjudicator have concurrent jurisdiction over the same legal
disputes. In those circumstances, where the dispute
has first been
lodged before a court, priority is given to the court by excluding
the jurisdiction of the Adjudicator. No doubt
this was because the
court could in any event override the decision of the Adjudicator in
proceedings under s 3OP. In the reverse
situation where the complaint
has been lodged with the Adjudicator and civil proceedings are
thereafter commenced before a court,
the same problem would not
arise. The reason is that before a civil court a plea of lis alibi
pendens could be raised. That is
clear from the judgment of Nugent
AJA in Nestle (South Africa) (Pty) Ltd v Mars Inc
2001 (4) SA 542
(SCA) para 17. A court would therefore have jurisdiction to decide
whether the civil proceedings should be stayed in order for
the
simple, inexpensive and expeditious proceedings before the
Adjudicator to deal with the problem, subject always to the right
to
appeal under s 3OP of the Act. In many cases no doubt the court would
accede to such a plea. It might, however, conclude, where
the point
was principally one of law, which would inevitably come before the
high court under s 3OP, if the Adjudicator made a
determination one
way or the other, that it was preferable to deal with the matter
immediately in the high court. As accepted by
counsel in reply it
would be permissible for a court dismissing a plea of lis alibi
pendens in those circumstances also to grant
an order staying the
proceedings before the Adjudicator.
[30]
Once
there is a proper appreciation of the structure of chapter VA and the
linkage between the various provisions, particularly
the definition
of complaint, the status of the Adjudicator’s award as a civil
judgment in terms of s 300 and the right of
access to court under s
3OP, the role of s 30H(2) is perfectly clear. It is to deal with
concurrence of jurisdiction in circumstances
where the matter to be
investigated by the Adjudicator is a matter already before the civil
court having jurisdiction. In determining
what the matter is before
the civil court and comparing it with the matter which would be the
subject of an investigation by the
Adjudicator it is appropriate to
adopt the same approach as that in the case of a plea of lis alibi
pendens as discussed by Wallis
JA in Caesarstone Sdot-Yam Ltd v The
World of Marble and Granite CC
2013 (6) SA 449
(SCA). Here the matter
to be investigated by the Adjudicator would be the validity of the
rule relied on by the fund in the civil
action. That would also be
the matter in issue before the high court.
[31]
In
reply the City sought to make the point about the differences between
the complaint and the issues raised. The short answer to
that is that
it was obliged in its plea to advance all the grounds upon which it
claimed that the rule was invalid. If it did not
do so and then
failed in its defence to the action it would be precluded from
thereafter seeking to attack the rule by the ‘once
for all’
rule and the principles of res judicata. See African Farms and
Townships Ltd v Cape Town Municipality
1963
(2)
SA 555
(A).
[32]
In
the circumstances I am not persuaded that the high court was wrong in
coming to the conclusion that the Adjudicator was precluded
from
determining and investigating the complaint by virtue of the
proceedings in s 30H(2) of the Act. It therefore follows that
the
appeal must fail.
[33]
In
the result the following order is made.
‘
The
appeal is dismissed with costs’
K
K MTHIYANE
ACTING
PRESIDENT
APPEARANCES
For
Appellant: JA Newdigate SC (with him GA Leslie)
Instructed
by:
Cliffe
Dekker Hofmeyr Inc, Cape Town
Rosendorff
Reitz Barry Attorneys,
Bloemfontein
For
Respondent: N Arendse SC
Instructed
by:
Thipa
Incorporated Attorneys,
Braamfontein
Honey
Attorneys, Bloemfontein
[1]
In
section 1 of the Act the ‘fund’ is defined as follows:
‘
fund’
means
a pension fund organisation, and ‘pension fund’ or
‘registered fund.
[2]
In section 1 of the Act
the board is defined as follows:
‘
board’
means the board of a fund contemplated in section 7A of this Act.
That section deals with the composition and the
various powers,
duties and functions of the Board and other related matters.
[3]
The Western Cape Local
Government Organisation, which is the Cape Regional Branch of SALGA,
the South African Local Government
Association.
[4]
South African Local
Government Association, which is the Employers’ Organisation.