Roestorf and Another v Johannesburg Municipal Pension Fund and Others (235/11) [2012] ZASCA 24; 2012 (6) SA 184 (SCA); [2012] 3 All SA 68 (SCA) (23 March 2012)

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Roestorf and Another v Johannesburg Municipal Pension Fund and Others (235/11) [2012] ZASCA 24; 2012 (6) SA 184 (SCA); [2012] 3 All SA 68 (SCA) (23 March 2012)

THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 235/11
In the matter between:
R ROESTORF
…...................................................................................
1
ST
APPELLANT
J A JANSEN VAN VUUREN
…............................................................
2
ND
APPELLANT
and
JOHANNESBURG MUNICIPAL
PENSION FUND
….......................
1
ST
RESPONDENT
LEKANA EMPLOYEE
BENEFIT SOLUTIONS (PTY) LTD
…..........
2
ND
RESPONDENT
CITY OF JOHANNESBURG
METROPOLITAN MUNICIPALITY
…..
3
RD
RESPONDENT
PENSION FUNDS
ADJUDICATOR
…..............................................
4
TH
RESPONDENT
Neutral citation
:
Roestorf v Johannesburg Municipal Pension Fund
(235/11)
[2012]
ZASCA 24
(23 March 2012)
Coram:
NAVSA,
NUGENT, HEHER, CACHALIA AND TSHIQI JJA
Heard:
20 February
2012
Delivered:
23
March 2012
Updated:
Summary:
Pensions
–
Pension Funds Act 24 of 1956
– Adjudicator –
application to review decision in terms of
s 30P
– whether
further complaints against pension fund can competently be raised by
counter application.
Pension Fund rules –
interpretation.
Prescription –
pension paid monthly – claim that pension entitlement wrongly
calculated – whether claim prescribes
or is time-barred by
s
30I
of Act.
Costs – whether
party substantially successful should be deprived of costs.
____________________________________________________________________________________
ORDER
On appeal from:
South Gauteng High Court
(Johannesburg) (Maluleke J sitting as court of first instance):
1. The appeal is
dismissed.
2. Each party is to pay
its own costs on appeal.
_______________________________________________________________________
JUDGMENT
_____________________________________________________________________
HEHER JA:
[1] The two appellants
were until 1995 employees of the City of Johannesburg (the third
respondent). It was a condition of their
employment that they become
and remain members of the first respondent, the Johannesburg
Municipal Pension Fund (‘the Fund’).
[2] Both appellants
applied to retire from service on the grounds of ill-health and were
duly medically boarded, first appellant
with effect from 1 December
1995 and second appellant from 1 September 1995. At the time the
first appellant was four days short
of 34 years of age and had been
employed by the city since 1 January 1988, while the second appellant
was 31 years and 5 months
old and had begun his employment on 1 April
1988.
[3] The appellants
qualified for retiring benefits in terms of the Rules of the Fund.
Both were regarded as totally incapacitated
by their respective
physical and mental conditions and their pension entitlements were
calculated with regard to that incapacity.
[4] The appellants
received the pensions as calculated without demur until 2003. On 4
September of that year the first appellant
was deemed totally
incapacitated in proceedings brought by him against the City under
the Compensation for Occupational Injuries
and Diseases Act 130 of
1993. During the course of a conversation between the appellants and
the consultant employed by them in
those proceedings, their pension
entitlements were discussed and, after reference to rules 21(1)(b)
and 16 of the Fund, the appellants
were advised by the consultant
that they were entitled to full benefits as if they had remained in
the employment of the City to
the age of 63 years. This, according to
the appellants’ replying affidavit ‘triggered us to
believe that our entitled
retirement benefits were incorrectly
calculated’.
[5] The appellants
arranged a meeting on 21 October 2003 with the Fund’s actuary,
Mr Hunter, who advised them that they were
wrong in their
interpretation of the Rules but undertook to submit their grievances
to the Board of Trustees. When the Board refuted
their claims they
reluctantly accepted the decision. As the second appellant deposed,
‘It must be taken into consideration
that the computations of
our retiring benefits are highly technical issues’.
[6] As a result of a
communication received by the appellants from the Fund in December
2005 relating to proposed changes to the
Fund, their dormant
suspicions as to the correctness of the computation of their benefits
were re-aroused. Their endeavours to
address their perceived wrongs
through meetings and correspondence with the City and the Fund proved
fruitless. They took legal
advice. As a result, on 8 February 2006,
they filed a complaint with the Pension Funds Adjudicator (the fourth
respondent) in terms
of
s 30A(3)
of the
Pension Funds Act 24 of 1956
.
[7] The
complaint was directed to three principal issues of which one was
upheld by the Adjudicator,
viz
that
the complainants’ retiring benefits had been incorrectly
calculated in contravention of the Rules of the Fund. The Adjudicator

ordered the Fund ‘to compute the complainants’ disability
pension at the rate of 2.0108 in terms of
rule 16(b)
’ within 7
days of the date of the determination, and to pay the revised pension
and arrears together with interest within
a further 7 days.
[8] The Fund,
dissatisfied with the determination, applied to the South Gauteng
High Court as contemplated in s 30P of the Act for
an order reviewing
and setting aside the determination and confirming the Fund’s
computation of the appellants’ pensions
at the rate of 1.7156
in terms of rule 16(b).
[9] The appellants
opposed the application while the Adjudicator abided the decision of
the court. The appellants applied in reconvention
by notice of motion
dated 2 February 2010 for five declaratory orders as follows:
‘
1.1
That in terms of Rule 15 of the rules of the applicant [the Fund],
the second respondent [Roestorf] is entitled to 10 years
Bonus
service;
1.2
That in terms of Rule 15 of the rules of the applicant, the third
respondent [Jansen van Vuuren] is entitled to 7 years’
Bonus
service;
1.3
That in calculating the retiring benefits in terms of Rule 16 of the
rules of the applicant, the second and third respondents
are entitled
to the benefits to be calculated up and to their normal retirement
age of 63, which is on the 5
th
December 2024, and the 19
th
May 2027 respectively;
1.4
That the second and third respondents are entitled to have included
in the computation for their retirement benefit, all the
increases
and all declared allowances as stated in the Johannesburg Conditions
of Service;
1.5
That the second and third respondents are entitled to a thirteenth
cheque, equal to one month’s salary yearly, and that
they are
entitled to have such thirteenth payment included in the computation
of their retiring benefits;
1.6
That the second and third respondents are entitled to interest a
tempore morae on all arrear monies owed, as from date of termination

to date of payment.’
The appellants sought an
award of costs against the Fund and such other respondents as opposed
the relief that they claimed. In
the event opposition came from the
Fund and the City.
[10] Maluleke J made an
order in the following terms:
‘
1.
The application to set aside the determination of the Adjudicator is
upheld and granted with costs.
2.
The Adjudicator’s determination dated 25
th
September 2009 directing the
applicant to compute the pension of the second and third respondents
at the rate of 2.0108% is set
aside.
3.
The second and third respondents’ claims in reconvention are
dismissed with costs including the costs of two counsel for
the
applicant and the costs of the fifth respondent [the City].
4.
The costs in paragraph 1 to include the costs of two counsel for the
applicant and the costs of the fifth respondent.’
[11] In brief, the
learned judge held that:
1. The appeal against the
determination of the Adjudicator should be upheld because the
complaint to her was time barred in terms
of s 30I of the Act and had
prescribed in terms of
s 12
of the
Prescription Act 71 of 1969
.
2. The Adjudicator had
erred in equating the ‘exact age of retirement’ in
s 16
of the Rules with the pensionable age of 63 years in determining the
percentage rate of calculation.
3. The claims in
reconvention had not formed part of the appellants’ complaint
to the Adjudicator and because the ambit of
the Count’s
jurisdiction is delimited by the terms of the complaint, the court
possessed no jurisdiction to entertain those
claims.
4. In any event, the
claims in reconvention were time-barred in terms of s 30I of the Act
and had also prescribed.
[12] The learned judge
refused the appellants’ leave to appeal to this Court but leave
was granted on application under s
21(2) of the Supreme Court Act 59
of 1959.
[13] On appeal before us
appellants’ counsel limited their appeal to the following
issues:
1. The correctness of the
findings of the court a quo in relation to the time-barring and
prescription of the complaint and claims
in reconvention.
2. Whether the claims in
reconvention constituted impermissible new matter before the court a
quo.
3. Whether the
appropriate factor in the calculation of the pension entitlements was
1.7516% or 2.0108%.
4. Whether ‘bonus
service’ should also have been included in the calculation of
‘pensionable service’ in
respect of both appellants and
if so, the effect that such inclusion would have on the calculation.
5. The application to and
effect of ‘final average emoluments’ in rule 16 on the
calculation of the appellants’
pensions.
[14] The issues
summarised in item 1 of the previous paragraph may conveniently be
dealt with together.
Prescription
[15] Counsel for the Fund
and the City supported the conclusion of the court a quo that such
claim to a correction of the appellants’
pension fund
entitlement as may arisen from an incorrect computation by the Fund
had been extinguished by prescription. They contended
that
prescription commenced to run shortly after the appellants were
provided with details of their entitlement towards the end
of 1995
and by reason of s 12(1) read with
s 12(3)
of the
Prescription Act
the
period of three years was completed some time before the year
2000.
[16] So technical an
avoidance of correcting a manifest injustice may be regarded as
morally questionable. It is also unsound according
to principles of
law.
[17] It is
no doubt possible and, perhaps, correct to regard each incorrect
monthly payment as a breach of contract by the Fund
which gives rise
to an independent cause of action and results in a series of debts
arising from month to month. See in this regard
Barnett
and Others v Minister of Land Affairs and Others
2007
(6) SA 313
(SCA) at 321D-322A and the cases there cited. In such an
event each cause would prescribe three years from the date that it
arose.
I prefer, however, to approach the case from a different
perspective.
[18] On retirement the
appellants qualified for and were the recipients of pensions
justified by their total incapacity to perform
their duties in the
service of the City. Their pension entitlement was an annualised sum
(annuity) paid monthly to each of them.
The Fund commenced such
payments in 1995 and has done so ever since. The only rationale for
such payments was the Rules of the
Fund to which the appellants had
been contributing members. However, each payment constituted a tacit
acknowledgement of the Fund’s
obligation to pay according to
its Rules. For the purposes of the
Prescription Act that
obligation
was the ‘debt’ owed to and claimable by the appellants.
[19] Section 14 of the
Act provides:
‘
(1)
The running of prescription shall be interrupted by an express or
tacit acknowledgement of liability by the debtor.
(2)
If the running of prescription is interrupted as contemplated in
subsection (1), prescription shall commence to run afresh from
the
day on which the interruption takes place or, if at the time of the
interruption or at any time thereafter the parties postpone
the due
date of the debt from the date upon which the debt again becomes
due.’
In
Agnew
v Union and South West Africa Insurance Co Ltd
1977
(1) SA 617
(A) at 623A this Court approved the dictum of Broome JP in
Petzer v Radford
1953
(4) SA 314
(N) at 317H:
‘
To
interrupt prescription an acknowledgement by the debtor must amount
to an admission that the debt is in existence and that he
is liable
therefor.’
The Fund has
satisfied both requirements each month as it has paid the appellants’
pensions pursuant to the rules. The consequence
has been a continuing
and ongoing interruption of prescription in relation to every amount
each appellant was entitled to claim
as his correctly-calculated
benefit. The fact that the fund has each month, paid a lesser amount
and contended consistently that
that amount and no more represented
the correct computation of its obligation under the rules does not
change matters. As Van Heerden
J explained in
Erasmus
v Grunow en ‘n Ander
1978 (4) SA 233
(O) at 244A-D:
‘
Na
woordlui vereis art 14 (1) egter nie dat die skuldenaar ten volle
aanspreeklikheid moet erken nie. Die skuldenaar wat erken dat
hy vir
‘n gedeelte van die skuld aanspreeklik is, erken dan ook steeds
aanspreeklikheid vir of ten opsigte van daardie skuld.
Neem bv die
geval waarin die skuldenaar, wat ‘n motorkar vir R1 000
aangekoop het, die kooptransaksie erken maar die houding
inneem dat
die koopprys slegs R900 bedra. Die skuld voer ‘n objektiewe
bestaan en word, behalwe uit ‘n bewysoogpunt,
nie geraak deur
die skuldenaar of skuldeiser se siening of betwisting van die
presiese omvang of terme daarvan nie. In die gegewe
voorbeeld erken
die skuldenaar die skuld en betwis hy slegs die omvang daarvan.
Anders gestel, erken hy aanspreeklikheid ten opsigte
van die skuld,
maar stel hy die omvang van sy aanspreeklikheid in geskil. Ook die
skuldenaar wat beweer dat hy reeds gedeeltelik
presteer het, erken
aanspreeklikheid teenoor die skuldeiser ten opsigte van ‘n
bepaalde skuld. Sekerlik kan nie in een van
hierdie gevalle gesê
word dat die skuldenaar aanspreeklikheid
ontken
nie.’
Moreover, as
the learned judge further pointed out –
ibid
at 244E-245H - the wording of ss 14(1) and
15(1) of the Act leads to the conclusion that the legislature
intended that a partial
acknowledgement of a debt should have the
effect of interrupting prescription in respect of the whole debt.
(See also
Solomons v Multilateral Motor
Vehicle Accident Fund
1999 (4) SA 237
(C).)
[20] Thus it is that, in
the circumstances of the present case, the Fund has by its repeated
payments to the appellants ensured
that their claims to a correction
of their entitlements have been protected against prescription. In
the present instance that
applies not only to that part of the claim
that was included in the complaint to the Adjudicator but also to the
claims which first
surfaced in the counter-application in 2010.
The time bar
provisions
[21] At the time of
submission of the complaint section 30I of the Act provided as
follows:
‘
(1)
The Adjudicator shall not investigate a complaint if the act or
omission to which it relates occurred more than three years
before
the date on which the complaint is received by him or her in writing.
(2)
If the complainant was unaware of the occurrence of the act or
omission contemplated in subsection (1), the period of three
years
shall commence on the date on which the complainant became aware or
ought reasonably to have become aware of such occurrence,
whichever
occurs first.
(3)
The Adjudicator may on good cause shown or of his or her own motion-
(a)
either before or after expiry of any period prescribed by this
Chapter, extend such period;
(b)
condone non-compliance with any time limit prescribed by this
Chapter.’
1
[22] Section
30I(2) is in substance the equivalent of
s 12(3)
of the
Prescription
Act.
2
[23
] The
application of both sections turns on the proven facts. The
limitation does not begin to run until a creditor has full knowledge

of his rights or can, by the exercise of reasonable care acquire such
knowledge. The onus in this regard lies on the party relying
on it:
Minister of Finance and Others v Gore NO
2007
(1) SA 111
(SCA) at 119B. In the present instance there is no serious
dispute that at the time of the termination of their employment in
1995
neither appellant possessed actual knowledge or an understanding
of the basis of correctness or defectiveness of the calculation
of
his pension entitlement. As I have earlier noted their testimony is
that the first seeds of awareness and suspicion of impropriety
were
sown in their minds during the conversation with their consultant in
the compensation proceedings in September 2003. Maluleke
J did not
believe them. He found that the evidence of the appellants that they
only became aware of the cause of their complaint
in 2003 was
‘improbable and unconvincing’. He referred to the
‘undisputed fact that they were given details of
how their
pensions were calculated’ in 1995 and that ‘from that
time they commenced receiving their monthly pension
as calculated at
the time of their requirement’.
[24] The details
furnished to the appellants in 1995 formed part of the papers before
the court a quo. Of themselves, they contribute
little to an
understanding by the appellants’ of their entitlement. Even
when studied in conjunction with the Rules they
are confusing.
[25] If the deeming
provision is relied on then the creditor cannot be held to have been
under a duty to take reasonable care unless
and until the
circumstances demand the exercise of such care from him; the more
obvious the need, the more pressing the exercise;
the more obscure
the need, the less demanding the exercise. The respondents’
submission is that all information as to the
content of the Rules and
the means employed by the Fund to calculate the appellants’
entitlements was available on request
from (and before) the
notification to the appellants of the Fund’s final
determination of their entitlements and that a reasonable
person
would have immediately (or certainly within a short time) made
enquiries and satisfied himself or herself of the correctness
of the
calculation.
[26] In my view such an
approach is too stringent. The appellants possessed no knowledge or
expertise in relation to the Rules.
They relied entirely, as they
were entitled to do, upon the good faith, care and expertise of the
officials of the Fund. Moreover
the Rules and their interpretation in
relation to incapacity benefits are anything but simple, as the
debate between counsel in
this court merely served to emphasise. Even
if the appellants had been placed in possession of a copy of the
Rules they would necessarily
have needed to seek appropriate expert
advice on the matter. But in my view it is not reasonable to expect
the beneficiary of a
pension fund to query the determination of his
benefit or seek expert advice unless there is information available
to him which
should lead him as a member to believe that a mistake
might have been made. As was said in
Gore’s
case, at
120F, ‘mere suspicion not amounting to conviction or belief
justifiably inferred from attendant circumstances does
not amount to
knowledge’. The first intimation of a mistake occurred during
the conversation with the consultant in September
2003. It follows
that the respondents did not establish the deemed awareness referred
in
s 30I(2)
at a date more than three years before the complaint was
received by the Adjudicator.
[27] In order to complete
the picture, in the context of the limitations, attention should be
drawn to
s 30H(3)
of the
Pension Funds Act which
provides for an
interruption of prescription under that Act or the rules of the fund
in question upon receipt by the Adjudicator
of a complaint (in terms
of s 30A(1)). Because of the conclusion that I have reached in
relation to the interruption under
s 14(1)
of the
Prescription Act, s
30H(3) is rendered of no consequence in the present case.
Was the court a quo
confined to deciding the subject-matter of the complaint to the
Adjudicator?
[28] Having disposed of
the respondents’ reliance on the time related objections I
should be able to proceed to the issues
of substance, ie those
matters said to affect adversely the computations of the appellants’
pensions.
[29] First, however,
another technical objection by the respondents must be addressed. The
respondents contend that the relief embodied
in paras 1.1, 1.2 and
1.4 of the claims in reconvention did not form part of the complaint
to the Adjudicator under
s 30A
of the
Pension Funds Act. That
is
common cause. They submit that the High Court was therefore correct
in finding that it had no jurisdiction to consider the
counter-application as
s 30P
of that Act provides that:
‘
(1)
Any party who feels aggrieved by a determination of the Adjudicator
may, within six weeks after the date of the determination,
apply to
the division of the Supreme Court which has jurisdiction, for relief,
and shall at the same time give written notice of
his or her
intention so to apply to the other parties to the complaint.
(2)
The division of the Supreme Court contemplated in subsection (1)
shall have the power to consider the merits of the complaint
in
question, to take evidence and to make any order it deems fit.’
[30] Ouster
of jurisdiction occurs only when that conclusion flows by necessary
implication from the statutory provisions and then
only to the extent
indicated by such implication:
Welkom Village
Management Board v Leteno
1958 (1) SA 490
(A)
at 502G-H. The Act does not expressly or by necessary implication
exclude the jurisdiction of the court to adjudicate upon
matters not
the subject of a complaint to the Adjudicator. Nor does the
Adjudicator possess exclusive jurisdiction to grant relief
in all
disputes between pension funds and their members. Such indications as
there are point the other way. Section 30H provides
that:
‘
(2)
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.’
Thus this
sub-section affords priority in relation to the investigation of a
complaint to a court if a complaint is initiated in
that court before
it is brought within the purview of the Adjudicator. In the present
instance the investigation of the matter
of the counter-application
did not, save, perhaps, in respect of para 1.4, constitute the
subject-matter of the respondents’
complaint to the Adjudicator
and was initially raised before the High Court. That was, as I see
it, perfectly permissible albeit
that it took the form of a counter
application, to what was in effect an appeal from the Adjudicator’s
decision:
Meyer v Iscor Pension Fund
2003
(2) SA 715
(SCA) at 726A.
The merits of the
appeal
[31] The first issue to
be decided is whether upon a proper interpretation of rules 16 and 21
of the Rules the appellants were entitled
to their pensions
calculated on the basis of the percentage applicable to an ‘Exact
age of retirement’ of 63 years
viz
2.0108%, or whether
the Fund was correct in applying the percentage applicable to an
‘Exact age of retirement’ of 60
years or under,
viz
1.7516%.
[32] The relevant
provisions are chiefly to be found in rules 21 and 16 which regulate
incapacity benefits and general retiring
benefits respectively.
[33] ‘
21
.
(1) If a member’s employment is terminated before he attains
the pensionable age because he has become, in the opinion of
the
medical board, either totally or partially incapable of efficiently
discharging his duties by reason of infirmity of mind or
body caused
without his own default, he shall, subject to the provisions of
subrule (3), be entitled to a retiring benefit calculated
in terms of
rule 16: Provided that the period of service to be taken into account
in calculating such benefit shall be equal to
the sum of his period
of pensionable service and-
(a)
in the case of partial incapacity, a period equal to-
(i)
one-third of the period of such pensionable service; or
(ii)
five years; or
(iii)
the period from the date of termination of employment to the date on
which he would have attained the age of 63 years, whichever
is the
shortest, any portion of a month in such sum being ignored; or
(b)
in the case of total incapacity, a period equal to-
(i)
four fifths of the period from the date of termination of employment
to the date on which he would have attained the age of
63 years; or
(ii)
the period contemplated in paragraph (a), whichever is the longer,
any portion of a month in such sum being ignored.’
.
. .
(5)
If a retiring benefit becomes payable to a member in terms of subrule
(1) or (3)(d), his employer shall forthwith pay to the
Fund an amount
equal to the capital value as determined by an actuary, or according
to tables furnished by an actuary, of the pension
and the lump-sum
payable to the member and of any pension that may become payable
after his death in respect of the period contemplated
in paragraph
(a) or (b) of the proviso to subrule (1), as the case may be.’
[34] ‘
16.
The retiring benefit payable to
a member shall consist of-
(a)
a lump-sum equal to 7 per cent of his final average emoluments per
year of pensionable service; and
(b)
a pension equal to the percentage specified below and opposite the
age at retirement of his final average emoluments per year
of
pensionable service;
EXACT
AGE AT RETIREMENT
(YEARS)
PERCENTAGE
60
or under 1,7516
61
1,8296
62
1,9160
63
2,0108
64
2,1140
65
2,2256
PROVIDED
THAT-
(a)
if the member’s age at retirement is not an exact number of
years, a portion of a month shall be ignored and the percentage

applicable shall be calculated on the basis of 12 months being equal
to the difference between the percentages applicable to the
ages in
years, specified above, immediately preceding and succeeding the
actual age at retirement.’
[35] It is common cause
that the ‘pensionable age’ of each of the appellants (as
defined in rule 1) was 63 years.
[36] In rule 1
‘pensionable service’ is defined as:
‘
a
period in years and complete months consisting of-
(a)
a member’s contributory service;
(b)
service purchased in terms of rule 14 by him and by his employer in
respect of him and which will be taken into account in the

calculation of a benefit in terms of these rules;
(c)
any bonus service contemplated in rule 15; and
(d)
any period of potential service contemplated in rule 18.’
[37] Likewise, in rule 1,
‘final average emoluments’ is defined. The relevant part
of the definition is found in sub-paragraph
(b):
‘
if
he has not been a member or pensioner continuously since 30 June
1984, the annual average of his pensionable emoluments over
the last
year of his contributory service or, if shorter than one year, over
the whole of his contributory service.’
[38] The appellants’
counsel would have us reason as follows:
1. Totally incapacitated
employees are in principle entitled to full compensation up to normal
retirement age:
Parry v Cleaver
[1969] 1 All ER 555
(HL);
[1970] AC1;
Smoker v London Fire and Civil Defence Authority
[1991] 2 All ER 449
(HL);
[1991] 2 AC 502.
2. Rule 21 upholds this
principle by providing in sub-rule (b)(ii) for the longer of the
periods in sub-rule (b) or (a).
3. The longer period in
the case of both appellants is said to be the period in sub-rule
(a)(iii) since at the respective dates
of retirement Roestorf had 29
years to pensionable age and Jansen van Vuuren had 32 years, in each
instance more than four-fifths
of the period from date of termination
of employment to the date on which each would have attained the age
of 63 years (as provided
in sub-rule (b)(i).
4. Because rule 21
provides for a ‘retiring benefit’ calculated in terms of
rule 16 one must have regard to rule 16.
In broad terms that rule has
only one constant ie the 7 per cent in rule 16(a). The terms ‘final
average emoluments’
and ‘pensionable service’ are
variable. The period of service that must be taken into account in
calculating a retirement
benefit of members who have been retired on
grounds of total incapacity is not only pensionable service but the
sum of pensionable
service and the period between the date of
retirement and the pensionable age of 63 years (rule 21).
5. Thus pensionable
service for the purposes of calculating a retirement benefit for
totally incapacitated members is not (as the
Fund contends) simply
the period for which the member has been in employment. It is rather
the pensionable service as defined plus
the balance of the
pensionable service that the member would have clocked up had it not
been for his (no fault) total incapacity.
[39] I am unable to
agree. The first step is to read the Rules. They constitute the
contract between the Fund and its members. If
ambiguity or
uncertainty appears it may be necessary to have regard to general
principles as an aid in interpretation. If however
the rules are
clear and admit of no ambiguity, then they must be given effect to
according to their tenor. The principles of interpretation
are these
enunciated in cases such as
Bekker NO v Total South Africa (Pty)
Ltd
1990 (3) SA 159
(T) at 170G-H and
Sassoon Confirming and
Acceptance Co (Pty) Ltd v Barclays National Bank Ltd
1974 (1) SA
641
(A) at 646B.
[40] According to rule 21
a member whose employment is terminated for total incapacity becomes
entitled to a retiring benefit calculated
in terms of rule 16, save
only
that
the period of service
that is used for
calculating the benefit under that rule is to be of the sum of his
pensionable service and the longer of (1) a
period equal to
four-fifths of the period from the date of termination to the date on
which he would have reached the age of 63
years, or (2) the period
calculated for an employee laid off for partial incapacity, ie the
shortest of (i) one third of the period
of the employee’s
pensionable service, or (ii) five years, or (iii) the period from
date of termination to the date he or
she would have reached the age
of 63 years. The argument summarised in para 36 above is simply wrong
in applying sub-rule (a)(iii)
to the calculation, since sub-rule
(a)(i) – one third of the appellants’ pensionable service
– is clearly the
shortest of the three possibilities in
sub-para (a) of rule 21(1).
[41] Reference to rule 16
shows that the recalculated ‘period of service’ takes the
place of ‘pensionable service’
and is relevant to the
calculation of the lump sum in sub-para (a) and the calculation of
the pension in sub-para (b) of that rule.
In the last-mentioned
regard it changes the number of years of service for the purpose of
acting as a multiplier of the employee’s
final average
emoluments but it has no bearing on the percentage specified in the
table which remains as it would be in the event
of retirement on
grounds other than total incapacity. There is therefore no reason to
confer on the expression ‘exact age
at retirement’ a
(distorted) sense which serves to provide the ‘total
compensation’ contended for by the appellant.
On the contrary,
‘exact age at retirement’ in its plain meaning refers to
the age of the member at the date of his
actual retirement and not to
an age at a deemed date of retirement (as the appellant’s
counsel would have it).
[42] Moreover, the table
increases the applicable percentage as the exact age at retirement
extends further beyond 60 years. This
is, as counsel agreed, in
recognition of the reality that life expectancy will decrease with
age. The Fund is thereby enabled to
provide a greater pension in
respect of a potentially shorter duration of payment. All persons who
retire at 60 years of age or
under are, for the purposes of the
calculation, regarded as possessing the same life expectancy. That
being so, it makes no sense
to deem members in the position of the
appellants as persons who retire at 63 years, thereby conferring on
them a life expectancy
in conflict with the structure of the table
and the reality.
[43] Thus the clear
purpose of the interaction between the proviso to rule 21 and rule 16
is to compensate the incapacitated employee
by extending the length
of pensionable service as a factor in the calculation. Its effect is
not to enhance compensation by increasing
the percentage applied to
the calculation of the pension.
[44] The exact age of
each of the appellants was ‘60 or under’ at the date of
his retirement for the purposes of the
table in rule 16. The
appropriate percentage was thus 1.7516. That is the percentage
applied by the Fund. There is no merit in
the appeal against the
finding on the complaint to the Adjudicator.
The appeal against the
refusal to grant the counter application
[45]
Bonus service
(1) The Fund allowed one
year in respect of each appellant as ‘bonus service’ to
be included in the computation of his
‘pensionable service’.
(2) The appellants
contend that the correct allowance should have been 10 years
(Roestorf) and 7 years (Jansen van Vuuren) respectively.
(3) The purpose of
recognising ‘bonus service’ in the context of the rules
seems to be the gratuitous award of additional
service as a factor in
the calculation of ‘pensionable service’ on termination
of membership of the Fund in consequence
of death, incapacity,
redundancy and retirement. The grant of such ‘bonus service’
by the Fund is conditional upon
the City (employer) paying the Fund
the actuarial value of such service. That is because no reciprocal
contribution by the employer
could be calculated or made during the
actual service of the employee because the date of the trigger event
is not known until
retirement.
(4) ‘Bonus service’
is merely one independent element in ‘pensionable service’
which is defined in rule
1:
‘”
pensionable
service” means a period in years and complete months consisting
of-
(a)
a member’s contributory service;
(b)
service purchased in terms of rule 14 by him and by his employer in
respect of him and which will be taken into account in the

calculation of a benefit in terms of these rules;
(c)
any bonus service contemplated in rule 15; and
(d)
any period of potential service contemplated in rule 18.’
In the present case
neither element (b) nor (d) of the definition is relevant.
(5) Also in rule 1,
‘contributory service’
‘
means
the period in years and complete months
in
respect of which contributions have been made or are payable
to
the Fund by or in respect of a member, including any service with
another local authority for which a transfer value has been
received
and any period of service contemplated in rule 13.’
(My
emphasis.)
Neither service with
another local authority nor the provisions of rule 13 play any role
in the appellants’ case.
(6) In terms of rule 15
(1) on the happening of the specific event the member ‘shall be
granted in respect of each completed
period of five years of
pensionable service contemplated in paragraphs (a), (b) and (d) of
the definition of ‘pensionable
service” in rule 1 bonus
service of one year subject to a maximum period of bonus service of
ten years: Provided that any
period of service in respect of which
bonus service is granted in terms of sub-rules (2) and (3) shall not
be taken into account
for the purposes of this subrule.’
In terms of rule 15(3):
‘
Subject
to the provisions of subrule (4), if a member who is designated as an
Assistant Head of Department, Deputy Head of Department
or Senior
Deputy Head of Department or Chief Deputy Head of Department dies, or
retires as contemplated in subrule (1) or has his
employment
terminated in terms of rule 21 or 22, he shall be granted the
following bonus service in respect of completed years
of contributory
service:
(i)
one year for every four completed years as an Assistant Head of
Department;
(ii)
one year for every three completed years as a Deputy Head of
Department; and
(iii)
one year for every two completed years as a Senior Deputy Head of
Department; and
(iv)
one year for every two completed years as a Chief Deputy Head of
Department.
PROVIDED
THAT-
(a)
the sum of the periods of bonus service granted in terms of this
subrule and subrule (1) shall be subject to a maximum of ten
years;
and
(b)
if a member is promoted to a higher designation, “one month”
and “completed months” shall be substituted
for “one
year” and completed years”, respectively, for the purpose
of determining bonus service in terms of this
subrule.’
(7) Rule 15(4) provides:
‘
(4)
The periods of bonus service referred to in subrules (1), (2) and (3)
shall be granted only if the employer concerned pays to
the Fund in
respect of such periods an amount calculated according to tables
furnished by an actuary.’
(8) It is common cause
that rule 15(1) applied to Roestorf at the date of his retirement and
rule 15(3) to Jansen van Vuuren. It
was upon the factual premise of
these rules that the Fund calculated a bonus service entitlement of
one year in respect of each
appellant.
(9) The submission of
their counsel was that the Fund erred in its premise because the
pensionable service of each appellant fell
to be calculated as if he
had retired at 63 years of age: therefore the calculation of ‘bonus
service’ necessarily
required that Roestorf be granted one year
of such service for every completed period of five years from the
commencement of his
pensionable service until he reached that age,
while Jansen van Vuuren was entitled to one year of such service for
every completed
period applicable to him under rule 15(3).
(10) I cannot accept the
submissions of appellants’ counsel in this regard. There is no
deemed extension of the duration of
‘pensionable service’
in rule 15 as there is in rule 16 (by reason of the proviso to rule
21(1)). As is obvious from
the definition of ‘pensionable
service’, it consists of independent elements of which ‘bonus
service as contemplated
by rule 15’ is one. ‘Contributory
service’ is the other relevant element in this instance. Its
meaning does not
assist the appellants because (a) the liability of a
member to contribute is limited to the period of his actual service
(rule
12)(1)(a)) and (b) the liability of his or her employer is
similarly limited (rule 12(1)(b)). The appellants became ‘pensioners’

of the Fund when they retired from the service of the City in 1995.
At that point no further contributions to the Fund were payable

because they no longer received ‘pensionable emoluments’.
Rule 13 deals expressly with deemed contributory service
(which
precedes employment before a person becomes a member of the Fund, and
is not here applicable). Rule 14(c) provides for the
addition to
contributory service of periods paid for by him at the date of
retirement and purchased for him by his employer. (Neither
is related
to the appellants’ circumstances.) There is no reason to
conclude that any amounts paid by the employer to the
Fund under rule
15(4) should be regarded as being for ‘contributory service’.
Bonus service and contributory service
are separate elements and if
such amounts were so regarded the recognition of bonus service as a
separate element would be superfluous.
(11) For these reasons
there was no merit in the relief claimed in paragraphs 1.1 and 1.2 of
the counter-application.
The calculation of
retiring benefits according to the appellants’ normal
retirement ages of 63 years
[46] The argument put
forward by the appellant depends on the grounds considered in
relation to the complaint to the Adjudicator
and suffers an equal
fate.
The inclusion in the
computation of ‘retiring benefits’ of ‘all
increases and all declared allowances as stated
in the Johannesburg
Conditions of Service’
[47] The intended scope
of this relief is unclear. As appears from the definition of ‘final
average emoluments’ (referred
to in para 37 above) each
appellant is entitled to the average of his pensionable emoluments
over the last year of his contributory
service. “Pensionable
emoluments” means
‘
a
member’s salary and-
(a)
such allowances as are specifically declared to be pensionable by his
employer; and
(b)
the rental value of any quarters which his employer specifically
allows him to occupy free of rental as a portion of his pensionable

emoluments or where his employer grants an allowance in lieu thereof
as a portion of his pensionable emoluments: . . .’
[48] The appellants have
not identified any allowances that have been the subject of a
specific declaration by the City and which
have not been taken into
account by the Fund in competing their pension entitlements. Nor have
they pointed to ‘increases’
which should have been
included. In so far as the purpose of the claim in para 1.4 was to
bring within the computation all increases
and allowances arising
between the dates of termination of their services and the dates of
their prospective retirements the contention
is not sustainable. It
is founded upon the proposition that the last day of the appellants’
‘contributory service’
is, properly interpreted, the last
day of their service as if they had continued working until the age
of 63 years. As I have shown,
that is not the premise of rule 16 for
the purpose of calculation of retiring benefits.
[49] Nor is there any
justification for interpreting ‘final average emoluments’
as if that were so. Indeed, from a practical
perspective it would be
unrealistic. The rules contemplate that a member’s retiring
benefit will be calculated once and for
all according to the formula
in rule 16. The ad hoc recalculation of a pension as salaries and
allowances are amended and increases
granted from time to time over a
long period of future years is not an exercise contemplated by the
rules and would require gazing
into a crystal ball rather than an
actuarial computation. I agree with the Fund’s counsel that the
interpretation advanced
by the appellants would, if implemented,
undermine the certainty and predictability of the defined-benefit
pension plan offered
by the Fund to the detriment of current members
and pensioners.
[50] Accordingly I find
that the appellants did not establish a right to the relief claimed
in para 1.4 of the counter-application.
Costs
[51] The appeal
accordingly fails in all substantial respects. In both courts much
unnecessary time was devoted to the prescription
and time bar issues
as well as the jurisdiction of the court a quo to adjudicate upon
issues not made the subject of the complaint
to the Adjudicator. On
all these preliminary aspects I have found in favour of the
appellants. I have also indicated earlier that
I regard the
procedural obstacles placed in the way of a decision on the merits of
their claim by both respondents as a less than
admirable manner of
dealing fairly with the bona fide concerns of pensioner members.
[52] In the exercise of
this Court’s discretion as to the proper apportionment of
costs, I think that it should decline to
award costs to the Fund and
the City despite their substantial success in both courts.
[53] The following order
is made:
1. The appeal is
dismissed.
2. Each party is to pay
its own costs on appeal.
__________________
J A HEHER
JUDGE OF APPEAL
NUGENT JA (NAVSA,
CACHALIA and TSHIQI JJA concurring):
[54] The claims that were
bought by the appellants before the Adjudicator have effectively been
superseded by their counterclaim.
In those circumstances it is not
necessary to decide whether their approach to the Adjudicator was
time-barred and I prefer not
to decide that issue.
[55] On the question
whether the debt that is the subject of the claim in reconvention has
prescribed I respectfully disagree with
the views expressed by my
colleague, which were not debated in argument before us. In my
opinion portion of the debt has not prescribed
but in view of the
conclusions reached by my colleague on the construction to be placed
upon the Rules, with which I respectfully
agree, the question of
prescription is not material to the outcome of this appeal, and I do
not find it necessary to express my
reasons for holding that opinion.
[56] With those
reservations I respectfully agree with my colleague that the claims
must fail on their merits, for the reasons that
he gives, and
accordingly I agree with the orders that he proposes.
________________
R W NUGENT
JUDGE OF APPEAL
APPEARANCES
APPELLANTS: V Ngalwana
(with him S Gcelu)
Ndumiso Voyi Inc, c/o J L
van der Walt, Johannesburg
Webbers, Bloemfontein
FIRST RESPONDENT: J M A
Cane SC (Ms) (with her K S McLean (Ms))
Moss Cohen &
Partners, Johannesburg
Lovius Block,
Bloemfontein
SECOND RESPONDENT: -
Lekana Employee Benefit
Solutions (Pty) Ltd, Johannesburg
THIRD RESPONDENT: A E
Franklin SC (with him T N Ngcukaitobi)
Bowman Gilfillan Inc, c/o
Haffegee Savage Attorneys, Johannesburg
McIntyre van der Post,
Bloemfontein
FOURTH RESPONDENT: -
Pension Funds
Adjudicator, Johannesburg
1
Section
30I was amended by s 21 of Act 11 of 2007.
2
As
the present ss (2) expressly provides.