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[2017] ZASCA 31
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Kitshoff v Fedsure Staff Pension Fund and Others (597/16) [2017] ZASCA 31 (28 March 2017)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
No: 597/16
In
the matter between:
JACOBUS
JOHANNES
KITSHOFF
APPELLANT
and
FEDSURE
STAFF PENSION FUND
FIRST
RESPONDENT
THE
BUILDING INDUSTRY
BARGAINING
COUNCIL
(CAPE
OF GOOD HOPE)
SECOND
RESPONDENT
COLIN
SOUTHEY
NO
THIRD
RESPONDENT
ELMARIE
DE LA REY NO FOURTH
RESPONDENT
Neutral
citation:
Kitshoff v Fedsure Staff
Pension Fund & others
(597/16)
[2017]
ZASCA 31
(28 March 2017)
Coram:
Shongwe, Swain, Zondi and Mathopo JJA and
Gorven AJA
Heard:
14 March 2017
Delivered:
28 March 2017
Summary:
Pension Fund,: termination of membership:
s14(1)
Pension Funds Act 24 of 1956
: transfer of benefits to new
pension fund approved by Registrar: employee retrenched before
approval: approval retrospective to
date when membership of former
fund terminated: no vested right to claim enhanced pension benefits
as a result of retrenchment
in terms of rules of former fund: right
ceased on termination of membership of former fund: no enforceable
right effected
by retrospective operation of approval.
ORDER
On appeal from:
Gauteng
Local Division of the High Court, Johannesburg (Masipa J sitting as
court of first instance)
The appeal is dismissed with costs.
JUDGMENT
Shongwe
JA (Swain, Zondi and Mathopo JJA and Gorven AJA concurring)
[1]
This is an appeal against a judgment and order of the Gauteng Local
Division of the High Court, Johannesburg (Masipa J), in
which the
court a quo dismissed with costs an application brought by the
appellant (as applicant) in terms of s 30P of the Pension
Funds Act
24 of 1956 (the Act) against a determination of the Acting Pension
Funds Adjudication (the adjudicator). The appeal is
with the leave of
the court a quo.
[2]
The common cause facts are that the appellant was employed by the
second respondent, The Building Industrial Bargaining Council
(BIBC
or Employer) since 17 October 1977 and was retrenched on 30 June
2003. The first respondent, Fedsure Staff Pension Fund (the
Fund), is
a pension fund to which the Employer was a contributor as defined in
s 4 of the Act. The third and fourth respondents
are respectively the
Actuary and Adjudicator against whom no costs order is sought and who
are not participants in this appeal.
[3]
During March 2002, Investec Employee Benefits (Investec) acquired
Fedsure Holdings Limited (Fedsure). Fedsure was the employer
as
defined in the rules of the Fund, along with its associated or
subsidiary companies or organisations. BIBC’s participation
as
an associated employer in the Fund derived from its relationship with
Fedsure. Fedsure was also the administrator of the Fund.
Investec
immediately notified the Employer and other participants that the
Fund would no longer be accepting contributions
from the Employer,
with effect from 1 July 2002. The Employer accepted this notification
and ceased contributing to the Fund as
from the 1 July 2002.
Thereafter the Employer made alternative arrangements to join Wizard
Universal Pension Fund (the WUPF) administered
by Sanlam Life
Insurance Ltd (Sanlam). The Fund, in order to complete the exit,
applied to the Registrar of Pension Funds (the
Registrar) for
approval of the transfer of the benefits from itself to WUPF in terms
of s 14(1) of the Act effective from 1 July
2002. The transfer was
approved on the 9 July 2004, with retrospective effect to 1 July
2002. After the appellant’s retrenchment
on the 30 June 2003,
WUPF paid the appellant a sum of R2 120 153 as his pension
benefits. This amount was determined
as at the date of transfer from
the Fund to the WUPF, together with investment returns thereon, as
well as the contributions paid
by the employer to WUPF from 1 July
2002 to 30 June 2003. The appellant was dissatisfied as this amount
did not include the enhanced
pension benefits he maintained he was
entitled to be paid on retrenchment, which would have increased the
amount payable to R2 649 460.
He then demanded the
shortfall of R529 307 from the Fund, alternatively his Employer.
[4] The appellant contended that he acquired a vested
right to the enhanced pension benefits from the Fund on 30 June 2003
when
he was retrenched and this right could not be affected by the
Fund’s transfer application in terms of s 14 of the Act, on
the
9 July 2004, even though it had retrospective operation to the 1 July
2002. The retrenchment benefits relied upon by the appellant
are
contained in rule 8, read with rule 5 of the Fund’s rules. Rule
8 reads as follows:
‘
8.
RETRENCHMENT BENEFITS
If a MEMBER has completed five years of SCHEME membership and his
services are terminated due to retrenchment in accordance with
the
EMPLOYER’S normal employment policies and practices, the MEMBER
shall be entitled to a cash lump sum equal to his withdrawal
benefit
calculated in accordance with RULE 7.1, of which that part of the
benefit which is not attributable to additional voluntary
contributions of transferred benefits, shall increased by 5,75% per
annum compound for each complete year of service’.
Provided that if a MEMBER is retrenched:
-
within ten years of NORMAL RETIREMENT DATE,
having completed at least five years of unbroken service with the
EMPLOYER, or . . .’
Rule
5 reads as follows:
‘
5.
RETIREMENT BENEFITS
5.1
Normal Retirement Date
5.1.1 Normal Pension
When a MEMBER retires from the service of the EMPLOYER at his NORMAL
RETIREMENT DATE, he shall receive a PENSION calculated as
2% of his
FINAL SALARY for each year of PENSIONABLE SERVICE. The PENSION will
be payable for a guaranteed period of 5 years, irrespective
of
whether the MEMBER survives or not, and for the life-time of the
MEMBER thereafter’.
A SPECIAL MEMBER will receive an additional 0.5% of FINAL SALARY for
the last 15 years of PENSIONABLE SERVICE before NORMAL RETIREMENT
DATE, or less than 15 years, such shorter period’.
The
appellant also contended that he qualified for the enhanced pension
benefits, payable on his retrenchment on 30 June 2003 which
he did
not receive, because for the period between 1 July 2002 and 30 June
2003, he remained a member of the Fund and no alternative
arrangements had been put in place for him to become a member of
another pension fund. The subsequent approval of the Fund’s
transfer scheme to WUPF, lodged after the appellant had been
retrenched, could not affect the Fund’s, or the Employer's duty
to ensure that he received the full pension benefits due to him on
his retrenchment from the Employer, on 30 June 2003. He contended
that the Fund was obliged to pay him these enhanced pension benefits
and the Employer was obliged to make good any shortfall which
might
result from a short payment by the Fund, by virtue of the Fund’s
failure to take appropriate steps in the face of the
Fund's refusal
to accept contributions. He also relied upon Fund rule 4.2.1, which
requires each Employer to provide the balance
of the cost of any
retirement benefits for its members.
[5]
On the other hand, the Fund and the Employer contend that their
relationship was lawfully terminated with effect from 1 July
2002. On
this date the Employer ceased making contributions to the Fund and as
a result, ceased to participate in the Fund. It
accordingly ceased to
be an "employer" for the purposes of the rules of the Fund.
The result was that the appellant’s
membership of the Fund was
terminated when the Employer ceased to be a participating contributor
to the Fund. It was submitted
that benefits that depend upon an
‘employer’s’ participation in the Fund could not
accrue to a member after the
‘employer’ ceases to be an
‘employer’ for the purposes of the rules. Since the
appellant was retrenched
on 30 June 2003, at a time when the employer
no longer participated as an ‘employer’ in the Fund, the
appellant was
not a member and therefore not eligible to receive
enhanced pension benefits in terms of rule 8 of the Fund’s
rules.
[6]
Aggrieved by the determination of the Adjudicator, after lodging a
complaint, the appellant approached the high court in terms
of s 30P
of the Act. He sought an order against the Fund, the Employer and the
Actuary. As against the Fund he prayed that it be
directed to
acknowledge its liability to accord him a supplementary pension
benefit of R529 307 plus interest from 30 June
2003. It was also
to advise him, the Employer and the Actuary of any shortfall that may
exist in its funds to make payment of this
amount. As against the
Employer, an order was sought that it be directed to acknowledge its
liability for any shortfall and to
pay the shortfall. As against the
Actuary, an order was sought that he be directed to acknowledge the
duty of the Employer to fund
such shortfall. The application was
opposed by the Fund and the Employer, but the Adjudicator and the
Actuary abided the decision
of the court.
[7]
The court a quo found that there was no legal basis for the Fund to
acknowledge any liability to the appellant to accord him
the enhanced
pension benefits he claimed, as a consequence of his retrenchment. It
reasoned that when the Employer stopped making
contributions to the
Fund in June 2002, it ceased being an ‘employer’ as
contemplated in the Fund's rules and the appellant
also ceased to be
a member of the Fund from this date. Because the eligibility of the
appellant for enhanced pension benefits in
terms of Rule 8 of the
Fund was based on the Employer’s participation in the Fund, the
appellant’s rights terminated
when the Employer stopped making
contributions.
[8]
Before this Court the appellant submitted that the Fund acted
unlawfully by refusing to accept contributions from the Employer
on
behalf of its employees after 1 July 2002. It was submitted that the
Employer was then still participating in the Fund, as were
its
employees (as fund members). Counsel for the appellant contended that
the appellant was never a member of WUPF. He further
contended that
Investec could not permissibly dictate to the Fund not to accept
contributions from the Employer. It was submitted
that the finding of
the high court that the Employer withdrew from the fund from the 1
July 2002, as a result of not paying its
contributions to the Fund
(as a consequence of not being permitted to do so) was erroneous. The
Fund could not escape liability
to the appellant on the basis that
the Employer purportedly left the fund on 1 July 2002 and that the
appellant was purportedly
also no longer a member from that date. The
Employer was required to make good on the shortfall which could
result, for the reasons
set out above.
[9] The gravamen of this case revolves around certain
undisputed essential facts. Investec, as the administrator of the
Fund having
acquired Fedsure, was entitled in my view, to instruct
the Fund that certain employers would no longer be eligible to
participate
in the Fund. As pointed out by the Employer, the rules of
the Fund do not provide for the Employers participation in the fund
in
perpetuity. Nor do they make its participation in the Fund a legal
requirement from which neither party can resile. Either party
was
entitled to terminate the relationship on reasonable notice. This is
consistent with the rule of contract that contracts of
indefinite
duration can be terminated by reasonable notice. The provisions of
rule 11.2 in fact make provision for the right of
an employer to
transfer its members to another scheme. Concomitant with the exercise
of such a right would be a right to terminate
the contract between
the Fund and the Employer. In the present case, the Fund exercised
its right to give notice of termination
of the agreement to the
Employer, which it accepted. Even if the Fund was not entitled to
terminate the agreement with the Employer
in this manner, its conduct
in giving notice to the Employer may be regarded as a repudiation of
the contract that existed between
the Fund and the Employer. In the
light of Investec's instruction to the Fund that the Employer would
no longer qualify to participate
in the Fund, the acceptance of the
repudiation by the Employer cannot be regarded as a breach of any
obligations it may have owed
to its employees, including the
appellant. It would have been a futile exercise for the Employer to
attempt to force the Fund to
accept its contributions. It then
decided, in the best interests of its employees, as contemplated by
rule 11.2 to make alternative
arrangements by joining and
transferring its members to WUPF. The law is clear on the principle
of offer and acceptance and repudiation
and acceptance. (See
Nash
v Golden Dumps (Pty) Ltd
1985 (3) SA 1
(A);
1985 All SA 161
at
22D-E) Corbett JA observed that:
‘
Where
one party to a
contract, without lawful grounds, indicates to the other party in
words or by conduct a deliberate and unequivocal
intention no longer
to be bound by the contract, he is said to "repudiate" the
contract (see
Van
Rooyen v Minister van Openbare Werke en Gemeenskapsbou
1978
(2) SA 835 (A)
at
845A - B). Where that happens, the other party to the contract may
elect to accept the repudiation and rescind the contract.
If he does
so, the contract comes to an end upon communication of his acceptance
of repudiation and rescission to the party who
has repudiated . . .’.
The
moment the Employer accepted the repudiation by the Fund, the ties
that existed between the Fund and the Employer terminated
ipso facto.
As a result the ties that existed between the Fund and the employees,
appellant included, also terminated. In the absence
of any ties
between the Employer (and employees) and the Fund, the appellant
lacked any right to claim any enhanced benefits from
the Fund. There
is accordingly no substance to the appellant’s contention that
the Employer acted unlawfully in accepting
the Fund’s notice
that it would no longer accept contributions from the Employer. The
position is exacerbated by the appellant’s
acceptance of the
payment of his benefits from WUPF. It is inexplicable how the
appellant can claim not to have been a member of
WUPF, but
simultaneously accept payment from WUFP.
[10]
Counsel for the appellant correctly conceded that if it is accepted
that the appellant was no longer a member of the Fund on
the date of
his retrenchment, which must be so, the appellant had no entitlement
to claim any benefits from the Fund and that would
be the end of the
appeal. In my view, the facts of this case clearly demonstrate that
the appellant was no longer a member of the
Fund when he was
retrenched on 30 June 2003. Not only did the Employer accept the
repudiation, it made alternative arrangements
by joining WUPF and
more importantly applied to the Registrar of Pension Funds for the
transfer of all its assets and liabilities
to WUPF in terms of s
14(1) of the Act, which application was approved on 9 July 2004 with
retrospective effect to 1 July 2002.
It is inexplicable why it took
so long to have the transfer approved. The validity of the transfer
is not attacked and therefore
stands until set aside. (See
Oudekraal
Estates (Pty) Ltd v City of Cape Town & others
[2004] ZASCA
48
; [2004] 3 All SA (1) (SCA) paras 27 and 28.)
[11] It is common cause that membership by the appellant
of the Fund derives from his being an employee of BIBC, and BIBC
being
an ‘employer’, as defined by the Fund’s
rules. The Fund in its answering affidavit stated the following;
‘
12.5.4
As the second respondent was not part of the acquisition by Investec
of Fedsure, the trustees of the Fund were required to
advise all such
“employers” that the Fund would no longer accept
contributions from such “employers” and
their “employees”
with effect from
1 July 2002
as the participating employers could no longer
participate in the First Respondent
. As such, the “refusal”
by the Fund to accept contributions with effect from 1 July 2002
was a requirement imposed
by Investec on the Fund as a consequence of
the transaction between Investec and Fedsure.’ (Emphasis added)
The
appellant did not deny the averments made in this paragraph. On this
basis the appellant accepted that as a result of the instruction
by
Investec, the Employer could no longer participate in the Fund, with
the result that the appellant could no longer be a member
of the
Fund.
[12]
It is not necessary to deal with the alternative claims of the
appellant. In summary, the appellant’s membership of the
Fund
was terminated on 1 July 2002. Accordingly there was no
legal basis on which he could claim enhanced benefits from
the Fund
or the Employer, as a result of his retrenchment on the 30 June 2003,
when he was a member of WUPF and received payment
of his pension
benefit from WUPF, in this capacity. For the reasons set out above,
there is no basis for the appellant's assertion
that the Fund’s
conduct was unlawful. For these reasons the appeal must fail.
[13] The following order is made:
The appeal is dismissed with costs.
__________________
J
B Z Shongwe
Judge
of Appeal
Appearances
For
the Appellant: P B J Farlam SC
Instructed by:
Herold Gie Attorneys, Cape Town;
McIntyre & van der Post, Bloemfontein.
For
the 1
st
Respondent: G D Goldman
Instructed by:
Cliffe Dekker Hofmeyr, Johannesburg;
Lovius Block, Bloemfontein.
For the
2
nd
Respondent: S Khumalo
Instructed by:
Shepstone & Wylie Attorneys, Johannesburg;
Honey Attorneys, Bloemfontein.