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[2011] ZASCA 96
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Eskom Pension and Provident Fund v Krugel and Another (689/2010) [2011] ZASCA 96; [2011] 4 All SA 1 (SCA); 2012 (6) SA 143 (SCA) (31 May 2011)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 689/2010
In the matter
between:
ESKOM PENSION AND
PROVIDENT FUND
....................................
Appellant
and
KRUGEL ELIZABETH
MARIA
...............................................
First
Respondent
DE LA REY EM N.O.
..............................................................
Second
Respondent
Neutral citation
:
Eskom Pension and Provident Fund v Krugel
(689/10)
[2011]
ZASCA 96
(31 May 2011)
Coram:
BRAND, LEWIS, MAYA, TSHIQI JJA AND PETSE AJA
Heard:
16 May
2011
Delivered:
31
May 2011
Summary:
Pension
– divorce proceedings –
ss 7(7)
and
7
(8) of the
Divorce
Act 70 of 1979
– order in respect of ‘pension interest’
– whether applicable to a member of a pension fund who resigns
from his employment before his divorce.
___________________________________________________________________
ORDER
On appeal from:
South
Gauteng High Court, Johannesburg (Lamont J sitting as court of
review):
1 The appeal is
upheld with no order as to costs.
2 The order of the
court below is set aside and replaced with the following:
‘
The
second respondent’s determination under reference number
PFA/GA/10192/2006/SM made, on 11 December 2009, in terms of
s 30M
of
the
Pension Funds Act 24 of 1956
in respect of the complaint lodged
by the first respondent is set aside and replaced with an order
dismissing the first respondent’s
complaint.’
__________________________________________________________________
JUDGMENT
__________________________________________________________________
MAYA JA (BRAND,
LEWIS, TSHIQI JJA AND PETSE AJA concurring):
[1] This is an
unopposed appeal against the judgment of the South Gauteng High
Court, Johannesburg (Lamont J). In that judgment,
the court below
dismissed an application brought in terms of s 30P of the Pension
Funds Act 24 of 1956 (the
Pension Funds Act) for
the review of the
second respondent’s determination which ordered the appellant
(the Fund) to endorse its records to give
effect to certain
provisions of a divorce order dissolving the first respondent’s
marriage to Mr PJ Krugel, a former employee
of Eskom and a member of
the Fund.
[2]
Krugel resigned from Eskom on 31 January 1993. Upon his resignation,
he elected to defer his pension benefit in the Fund in
accordance
with
Rule 30(2)
1
anc" HREF="#sdfootnote1sym">
1
of
the Fund’s rules and thus became a deferred pensioner.
2
He
and the first respondent were divorced on 14 September 2001. A
settlement agreement which they concluded and was made an order
of
court recorded, inter alia, that
‘
[Krugel]
is a member of a pension fund and has a pension interest in the Eskom
Pension Fund. The parties have agreed that the first
respondent is
entitled to 25% (twenty five per cent) of [Krugel’s] pension
interest with Eskom Pension Fund as calculated
on date hereof,
payable to the [first respondent] as soon as [Krugel] becomes
entitled to the pension benefits. [Krugel’s]
attorneys, SHAPIRO
& DE MEYER INC, will secure the registration of an endorsement
against the records of the aforementioned
pension fund, in order to
register the above provision against it. [Krugel] undertakes to give
on demand any assistance needed
in connection with the above.’
3
[3] However, when
approached, the Fund refused to register the required endorsement
against its records on the basis that the divorce
was granted after
Krugel had already elected to become a deferred member and no longer
had a pension interest in the Fund as contemplated
in the Divorce Act
70 of 1979 (the
Divorce Act), read
together with
s 37D
of the
Pension
Funds Act. This
prompted the first respondent to lodge a complaint in
terms of
s 30A
of the
Pension Funds Act which
allows the lodgement of
written complaints with the Fund for consideration by its board and,
if the board does not resolve a complaint
satisfactorily, by the
Pension Funds
Adjudicator.
[4] The second
respondent, relying on the provisions of
s 37D
(6) of the
Pension
Funds Act, found
that the provisions of
s 37D(4)
(d) – which
deem the accrual date to a member of ‘any portion of the
pension interest assigned to the non-member spouse
in terms of a
decree of divorce’ – include a deferred or preserved
benefit to be regarded as pension interest capable
of being shared
upon divorce’ and that the fact that Krugel’s ‘benefit
was deferred or preserved until the age
of 55 does not affect the
right of the non-member spouse to obtain her share as at the date of
divorce’. She concluded that
the benefit was deemed, in terms
of
s 37D
(4)(a) of the
Pension Funds Act, to
have accrued to the
member spouse on the date on which the decree of divorce was granted.
Thus, she upheld the complaint and made
an order against the Fund in
terms of which it was ordered to pay the first respondent or transfer
her portion of the pension interest
to a pension fund (depending on
her election) in terms of
s 37D
(4)(b)(i) and (iii) of the
Pension
Funds Act.
[5
]
The Fund was not satisfied with the second respondent’s
determination and, in challenge, launched a
s 30P
application, the
result of which is the subject of this appeal. The court below upheld
the second respondent’s findings and
conclusion. It found that
the legislature, by virtue of the provisions of the
Divorce Act,
intend
ed the widest definition, to the exclusion of the one provided
by the Fund’s rules, of the term ‘member’ of a
pension fund which it said meant ‘a person who possesses a
right to an asset in that fund’. The court found further
–
on the basis of
s 37D
(6) which it said ‘purports to vary the
definition of ‘pension interest’ in the
Divorce Act
. . .
to limit the fund . . . created to the period terminating on the date
the decree of divorce is granted’
–
that
ss 7(7)
and
7
(8) impliedly provide a formula by which an asset
comprising a pension benefit can be determined. The court then held
that Krugel
‘was a member of the pension fund at all material
times and that there was an existing asset which fell to be divided
25%
to the first respondent and 75% to her husband’.
[6]
The crisp issue on appeal, which is with the leave of the court
below, is whether the provisions of
ss 7(7)
and 7(8) of the
Divorce
Act entitle
a non-member spouse
4
to
receive benefits from a pension fund of which the other spouse is a
member pursuant to a divorce order where the member spouse
had
resigned from his employment before the date of divorce but deferred
his benefit in the pension fund.
[7] Counsel for the
Fund contended that on a proper interpretation of
ss 7(7)
and
7
(8) of
the
Divorce Act, there
was no pension interest which formed part of
Krugel’s assets which could be assigned to the first
respondent. This was so,
it was argued, because Krugel had already
resigned from his office on the date of divorce. His pension interest
had become payable
to him before the divorce and he was, furthermore,
no longer a member of the Fund.
[8]
A pension fund’s right to make deductions from a pension
benefit is highly circumscribed and may be exercised only as
expressly provided by sections 37D and 37A of the Pension Fund Act.
5
Relevant
for present purposes is s 37D which, in subsection (1)(d)(i), allows
a fund to ‘deduct from a member’s benefit
or minimum
individual reserve, as the case may be … any amount assigned
from such benefit or individual reserve to a non-member
spouse in
terms of a decree granted under
section 7(8)(a)
of the
Divorce Act,
1979
’. According to the provisions of subsection (4)(a), ‘the
portion of the pension interest assigned to the non-member
spouse in
terms of a decree of divorce or decree for the dissolution of a
customary marriage is deemed to accrue to the member
on the date on
which the decree of divorce or decree for the dissolution of a
customary marriage is granted’.
[9]
The first respondent’s entitlement, if any, must therefore
derive from the provisions of
ss 7(7)
and
7
(8) of the
Divorce Act,
which
deal with the pension benefits of a divorcing member of a
pension fund. The subsections
6
read:
‘
(7)
(a) In the determination of the patrimonial benefits to which the
parties to any divorce action may be entitled, the pension
interest
of a party shall, subject to paragraphs (b) and (c), be deemed to be
part of his assets.
(b) The amount so
deemed to be part of a party’s assets, shall be reduced by any
amount of his pension interest which, by
virtue of paragraph (a), in
a previous divorce –
(i) was paid over or
awarded to another party; or
for the purposes of
an agreement contemplated in subsection (1), was accounted in favour
of another party.
(c) Paragraph (a)
shall not apply to a divorce action in respect of a marriage out of
community of property entered into on or after
1 November 1984 in
terms of an antenuptial contract by which
community of
property, community of profit and loss and the accrual system are
excluded.
(8) Notwithstanding
the provisions of any other law or of the rules of any pension fund –
(a) the court
granting a decree of divorce in respect of a member of such a fund,
may make an order that –
(i) any part of the
pension interest of that member which, by virtue of subsection (7),
is
due or assigned to
the other party to the divorce action concerned, shall be paid by
that fund to that
other party when any pension benefits accrue in respect of that
member;
an endorsement be
made in the records of that fund that that part of the pension
interest concerned is so payable to that other
party;
(b) any law which
applies in relation to the reduction, assignment, transfer, cession,
pledge, hypothecation or attachment of the
pension benefits, or any
right in respect thereof, in that fund, shall apply
mutatis
mutandis
with regard to the right of that other party in respect
of that part of the pension interest concerned.’
[10] ‘Pension
interest’ and ‘pension fund’ are defined in
s 1(1)
of the
Divorce Act, as
amended by s 1(1) of the 1989 Act, as follows:
‘“
pension
fund” means a pension fund as defined in
s 1(1)
of the
Pension
Funds Act 24 of 1956
, irrespective of whether the provisions of that
Act apply to the pension fund or not’;
“
pension
interest”, in relation to a party to a divorce action who –
is a member of a
pension fund (excluding a retirement annuity fund), means the
benefits to which that party as such a member would
have been
entitled in terms of the rules of that fund if his membership of the
fund would have been terminated on the date of
the divorce on
account of his resignation from his office;
is a
member of a retirement annuity fund which was
bona
fide
established for the purpose of
providing life annuities for the members of the fund, and which is a
pension fund, means the total
amount of that party’s
contributions to the fund up to the date of divorce, together with a
total amount of annual simple
interest on those contributions up to
that date, calculated at the same rate as the rate prescribed as at
that date by the Minister
of Justice in terms of section 1(2) of the
Prescribed rate of Interest Act, 1975, for the purposes of that
Act’.
[11]
‘Pension interest’ is narrowly defined in the
Divorce Act
and
it refers to the value of the interest which a member of a
pension fund, on the date of his divorce, has in the pension benefit
that will accrue to him as a member of such fund at a certain future
date.
7
It
is readily apparent from all these statutory provisions that what is
contemplated is an award to the non-member spouse of any
part of this
interest (and no other amount held by the fund in respect of the
member spouse) calculated as at the date of the divorce
but with
effect from a certain date in the future when the pension benefit
accrues to the member spouse.
8
Once
the pension benefit has accrued ie beyond the date of divorce at
which time the pension interest converts into a pension
benefit,
the provisions of
ss 7(7)
and
7
(8) are no longer applicable.
9
[12] Here, as
indicated above, Krugel resigned from his job at Eskom on 31 January
1993, long before his divorce. His pension interest,
which is a
benefit determinable only at the time of an employee’s
resignation, had already become payable to him before the
divorce.
Clearly, he could not again be deemed to become entitled to a
resignation benefit. He simply no longer had a pension interest
for
purposes of
ss 7(7)
and
7
(8) of the
Divorce Act and
s 37D(4)(a)
of
the
Pension Funds Act, which
is specifically designed for purposes of
section 7(8)(a).
An order premised on the terms of these provisions,
therefore, was not competent.
[13] It seems to me
that the reliance placed on the provisions of the provisions of
s
37D(6)
was equally misplaced. The section reads:
‘
Despite
paragraph (b) of the definition of “pension interest” in
section 1(1)
of the
Divorce Act, 1979
, the portion of the pension
interest of a member of a pension preservation fund or provident
preservation fund (as defined in the
Income Tax Act, 1962), that is
assigned to a non-member spouse, refers to the equivalent portion of
the benefits to which that
member would have been entitled in terms
of the rules of the fund if his or her membership of the fund
terminated on the date on
which the decree was granted.’
[14] It is plain
from the wording of these provisions that they are intended to cater
only for ‘pension interest’ of
a member of a preservation
fund. As was pointed out in the unchallenged affidavit filed in
support of the appellant’s application
in the court below, it
was not established in the first respondent’s complaint that
Krugel was a member of a preservation
fund. It was contended that to
have become a member of a preservation fund (which is a different
legal entity from a pension or
provident fund as appears in its
definition in the Income Tax Act), Krugel would have had to transfer
all his pension assets and
liabilities from the pension fund to a
preservation fund that he would have then joined as a member and that
this was not shown
to have occurred. I agree. But there is, I think,
a more compelling reason to discount the applicability of these
provisions. It
must be borne in mind that the definition of ‘pension
interest’ in paragraph (b) of subsection 1(1) of the
Divorce
Act, which
s 37D(6)
seeks to extend, is wholly irrelevant for present
purposes. As illustrated above, it is the definition of ‘pension
interest’
contained in paragraph (a) thereof which is of
application to the facts of this matter. And the effect of that
definition on those
facts has been dealt with above. The essence of
the first respondent’s difficulty remains that at the date of
her divorce
no pension interest remained as Krugel had already
‘resigned from office’ as described in paragraph [12].
[15] Finally, it
should be mentioned that this finding does not leave the first
respondent without remedy. The divorce settlement
agreement between
her and Krugel (who undertook to give on demand any assistance needed
in connection with its enforcement) remains
binding. It is therefore
open to her to claim her share of his deferred pension benefit when
it is claimed by him after reaching
the age of 55 years.
[16] It follows that
the appeal succeeds. The appellant sought no order of costs both on
appeal and in the proceedings below which
were also unopposed. None,
therefore, shall be made. Accordingly, the following order is made:
1 The appeal is
upheld with no order as to costs.
2 The order of the
court below is set aside and replaced with the following:
‘
The
second respondent’s determination under reference number
PFA/GA/10192/2006/SM made, on 11 December 2009, in terms of
s 30M
of
the
Pension Funds Act 24 of 1956
in respect of a complaint lodged by
the first
respondent is set
aside and replaced with an order dismissing the first respondent’s
complaint.’
____________________
MML Maya
Judge of Appeal
APPEARANCES
APPELLANT: P. Van
Der Berg
Thyne Hunter
Esterhuizen, Johannesburg
McIntyre & Van
Der Post, Bloemfontein
1
Rule
30(2)
of the Fund rules dated 11 June 1999 deals with a member’s
resignation from service and provides: ‘If a member becomes
entitled to a benefit in terms of this rule, he may elect instead
that the board shall pay to him an amount not exceeding the
amount
which can be taken as a tax-free withdrawal benefit in terms of the
Income Tax Act, and that the excess of the actuarial
value in
respect of his service, as determined by the actuary, over the
amount so paid be deemed to be a voluntary contribution
made by him
on the date of leaving the service.’
2
The
Fund rules define a deferred pensioner as ‘a former member who
has elected to defer the payment of his benefits in terms
of Rules
28, 29 or 30 to a future dates which falls between his fifty and
sixty fifth birthday.’
3
Translated
from the Afrikaans text which reads:
‘
Eiser
is ‘n lid van ‘n pensioenfonds en het ‘n
pensioenbelang in die Eskom Pensioenfonds. Die partye kom ooreen
dat
verweerderes geregtig is op 25% (vyf en twintig persent) van die
Eiser se pensioenbelang by Eskom pensioenfonds, bereken
soos op
datum hiervan, en aan die verweerderes betaalbaar sodra die
pensioenvoordele die eieser toekom en/of toeval. Die eiser
se
prokureurs, SHAPIRO + DE MEYER ING, sal toesien tot die registrasie
van ‘n endossement teen die rekords van voormelde
pensioenfonds om die bepaling hierbo daarteen te registreer. Die
eiser onderneem om alle nodige bystand op aanvraag te lewer
in
bogemelde verband.’
4
‘
Non-member
spouse’ is defined in
s 1(1)
of the
Pension Funds Act as
meaning ‘a person who is no longer the spouse of that member
due to the dissolution or confirmation of the dissolution
of the
relationship by court order and to whom the court ordering or
confirming the dissolution of the relationship
has
granted a share of the
member’s
pension interest in the fund.
5
See
Hunter, Esterhuizen, Jithoo and Khumalo
The
Pension Funds Act: A
commentary
2010 1 ed at 662.
6
Inserted
by s 2 of the Divorce Amendment Act 7 of 1989.
7
Old
Mutual Life Assurance Co (SA) Ltd v Swemmer
2004
(5) SA 373
(SCA) para 18.
8
Government
Employees Pension Fund v Naidoo
2006 (6) SA 304
(SCA) para 1.
9
Ibid
,
fn 8;
De Kock v
Jacobson
1999 (4) SA
436
(W) at 349 F-G.