SAMWU National Provident Fund v Ntabankulu Local Municipality and Others (457/2015) [2018] ZAECMHC 43 (14 August 2018)

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[2018] ZAECMHC 43
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SAMWU National Provident Fund v Ntabankulu Local Municipality and Others (457/2015) [2018] ZAECMHC 43 (14 August 2018)

NOT REPORTABLE
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN
CAPE DIVISION, MTHATHA)
CASE
NO: 457/2015
In
the matter between
SAMWU
NATIONAL PROVIDENT
FUND
Applicant
and
NTABANKULU LOCAL
MUNICIPALITY
First
Respondent
MUNICIPAL EMPLOYEES
PENSION FUND
Second
Respondent
AKANI RETIREMENT FUND
ADMINISTRATORS (PTY)
LTD
Third
Respondent
VARIOUS EMPLOYEES OF
THE
NTABANKULU
LOCAL MUNICIPALTY
Fourth
to One Hundred
and
Twenty Eighth
Respondents
THE REGISTRAR OF
PENSION FUNDS
One
Hundred and
Twenty-Ninth
Respondent
JUDGMENT
HARTLE
J
The
parties
:
[1]
The applicant is a
pension fund organization as defined in section 1 of the Pension
Funds Act, No. 24 of 1956 (“the PFA”)
and registered as
such in terms of section 4 of the PFA (“the Provident Fund”).
[2]
The first respondent is
a municipality established in terms of section 2 of the Local
Government Municipal Systems Act, No. 32 of
2000 (“the
municipality”).  The municipality is a participating
employer in the Provident Fund.  It is common
cause, well at
least in respect of the period up until the end of August 2013, that
its employees who are the subject matter of
this application (“the
employees”) were members of the Provident Fund.
[3]
The second respondent
is the Municipal Employees Pension Fund (“the MEPF”)
which is also a registered pension fund organization.
It is to
this fund that the employees purported to “transfer”
their membership with effect from 1 September 2013.
[4]
The third respondent is
Akani Retirement Fund Administrators (“Akani”), an
approved administrator of the MEPF.
[5]
The
fourth to one hundred and twenty-eighth respondents are the various
employees of the municipality described in paragraph [2]
above whose
membership is at the heart of the dispute between the parties.
[1]
[6]
The
one hundred and twenty-ninth respondent is the Registrar of Pension
Funds (“the Registrar”), who is cited herein
in his
official capacity.  The registrar is appointed in terms of
section 3 of the PFA, read together with sections 1 and
13 of the
Financial Services Board Act, No. 97 of 1990.
[2]
The
background:
[7]
In
February 2015 the applicant launched the main application against the
municipality who was initially cited as the only respondent
in the
proceedings (“the main application”).  It sought by
the process to compel it in terms of regulation 33
of the Pension
Fund Regulations,
[3]
read
together with section 13 A(2) of the PFA, to furnish the applicant
with the “initial contribution statement” and
“subsequent
contribution statement” of the employees by virtue of their
membership of the Provident Fund from September
2013
[4]
to date, as well as payment of the arrear contributions in respect of
those members for the same period, together with interest
thereon.
[8]
In April 2015 the MEPF
and Akani brought an application for leave to intervene in the main
application claiming that they had a
direct and substantial interest
in the matter by virtue of the fact that the affected employees had
become members of the second
respondent since September 2013 and that
any order made by the court would affect them. The applicant
initially resisted the application,
on the basis that the employees
were not the MEPF’s members but conceded the relief at the
eleventh hour citing considerations
of convenience and cost saving.
The order joining them was granted on 20 November 2015.  The
reserved costs of that
application are also in contention.
[9]
The fourth to one
hundred and twenty-eighth respondents were joined to the proceedings
on 26 June 2016 by order of this court pursuant
to an
in
limine
objection of
their non-joinder successfully taken by the second and third
respondents. The two respondents had submitted that they
should be
joined considering their purported change of membership and the issue
of who the municipality should thereafter have
been accountable to in
respect of their pension contributions.  The applicant seeks no
relief against them and asserted that
it was in their view
unnecessary to cite them in the main application at all, their
objective being limited to enforcing compliance
by the municipality
with its rules and with the relevant statutory provisions,
co-incidentally in their interests.  The MEPF
however presently
purports to represent their interests in pursuing the constitutional
and mandatory relief sought by them in the
counter-application as
well as in respect of the collateral challenge to the main
application hereinafter referred to.
[10]
The Registrar was
joined in these proceedings by the second and third respondents by
order of court dated 30 May 2017, ostensibly
prompted by the
sentiment expressed by the applicant he has a vital interest in the
proceedings since there is an issue with contentious
Rule 3.2.1 of
its consolidated Rules which in its view precludes the purported
transfer of membership and benefits, and that the
relief granted by
this court pursuant to such a challenge might entail an amendment to
the Rules.
[11]
It
is relevant to mention that the employees have not opposed the main
application, neither have they pertinently associated themselves
with
the relief sought by the second and third respondents purportedly on
their behalf in the counter-application or in respect
of the
collateral review that was added at the eleventh hour before this
matter was heard as a “further defence in the main

application”.
[5]
[12]
The registrar has filed
a notice to abide the decision of this court.
[13]
It
is further relevant to mention that there was no appearance for the
municipality at the hearing of the application.
[6]
Indeed there was evidently no further exchange of any papers in the
matter after the second and third respondents entered
the fray, the
municipality appearing to accept that it had taken the matter as far
as it could go.
The
facts:
[14]
The facts of the matter
are uncomplicated.  Between July and September 2013 the
employees decided, this according to the municipality,
to terminate
their membership of the applicant and instead to join the second
respondent.  These elections followed a recruitment
drive by the
second respondent, at the invitation of the municipality to present
their “offering” as a fund to the
employees.  On 19
July 2013, a day after the second respondent was advised of their
election, the municipality sent a letter
to the applicant informing
its principal officer that the employees had taken a resolution to
resign their membership and advising
it that they intended to join
the second respondent.  The reasons justifying why the employees
considered themselves “unable
to remain in the fund” were
recorded and a request made to assist them in transferring their
monies to the MEPF and to ensure
that the FNB loans - which I assume
the municipality is on risk for, were cleared.
[15]
On 17 October 2013 the
municipality sent a further letter to the applicant in which it
informed it that effective from 25 September
2013 the employees
“should move” to the MEPF.  It requested the
applicant to negotiate with the second respondent
to effect the
transfer and noted its concern that employees might be prejudiced in
the case of death pending the process of transfer.
[16]
For some or other
reason there is a second letter addressed to the principal officer of
the applicant, on the same date, calling
his attention to the
municipality’s earlier unanswered letter of 19 July 2013, and
re-iterating that the employees had taken
individual decisions to
resign from the fund for the specified reasons and others “best
known to them”, and urging
him “as expected” to
transfer their funds “without delay”.  The acting
municipal manager recorded
the municipality’s expectation “that
(their) employees’ rights to freedom of association enshrined
in (the) Constitution
(would) be respected and honored”.
[17]
From 1 September 2013
to date the municipality has been paying pension contributions, on
its behalf and on behalf of the employees,
to the second respondent,
being the employees’ fund of choice according to the
municipality.
[18]
For reasons that are
not explained by the applicant, it failed to engage with the
municipality or the second respondent at all concerning
the
employees’ request initiated on their behalf.  It emerges
from the various affidavits filed in the matter however
that the
applicant does not or cannot accept that the employees have
terminated their membership with it either substantively or

procedurally.  Consonant with this stance, on 14 April 2014 the
applicant sent a letter to the municipality demanding payment
of the
outstanding contributions and urging it to provide the necessary
contribution schedule in terms of section 13 A of the PFA
from
September 2013 to date. It is common cause that the municipality has
been paying the pension contributions to the MEPF since
the date
which it regards as the effective date of transfer.  Although
the applicant claimed to have made several demands
of the
municipality to meet its statutory obligations in this respect, it
appears that only the single demand was made per letter
dated 14
April 2014, which was transmitted by email to the municipality on 16
February 2014.
[19]
It
is common cause that the municipality failed to comply with that
demand, or even to respond to it, which provided the impetus
for the
issue of the main application.
[7]
The
main application:
[20]
The
first to the third respondents have taken issue with the fact that
the applicant instituted the application for the mandamus
relief to
secure a calculation and payment of contributions which it claims is
due to it in respect of the employees a year and
a half after the
purported transfer of their membership to the MEPF. It also did so,
so the municipality complained, without disclosing
to this court the
peculiar history of the matter concerning its request for the
applicant and the second respondent to negotiate
with each other and
give effect to the employees’ wishes.
[8]
[21]
The applicant pleaded
in the main application that it simply had no option other than to
bring the application to enforce compliance
arising from the
municipality’s obligation as a participating employer to comply
with its statutory duties to contribute
to its employees’
pension fund and to provide information, which obligations the
municipality had “brazenly contravened”,
so that it could
get on with its own business, namely to collect the contributions
every month in respect of its members from the
municipality and to
invest them in accordance with the registered rules of the fund.
It co-incidentally asserted that this
obligation on it extended
“until such time that the members leave the service of the
employer and a benefit is payable to
them in terms of the registered
rules …”.  It also adverted to the obligation spelt
out in the rules itself which
require it to deduct from the
contributions it receives certain amounts which are needed to pay
premiums to insurers who have undertaken
to underwrite the risk
benefits payable to members who die whilst in service or become too
ill or physically incapacitated to carry
on work.  Attention was
drawn to the particular provisions of the rules, consonant with the
legal framework of the PFA, which
deal with the payment of
contributions by members and the participating employer, the schedule
pursuant to which these contributions
are calculated and the binding
nature of the rules.  The applicant also drew attention to the
relevant reporting functions
with which it is obliged to concern
itself which derive from the PFA and the regulations promulgated
thereunder and spelt out the
prejudice to it by the municipality’s
non-payment and related non-compliance.  This prejudice of
necessity redounds
to the disadvantage of the employee members whose
interests it is per force obliged to look out for under the
constraints of the
relevant statutory framework and fund rules. As
for the contentious history, it said not a word.
The
municipality’s statutory obligation within the strict
regulatory framework:
[22]
The obligatory nature
of the requirements relating to the payment of contributions by
employers of members of pension funds and
the furnishing of the
relevant information which the applicant seeks to compel, is set
forth in section 13 A(1) and (2) of the
PFA as follows:
“
13A.
Payment of
contributions and certain benefits to pension funds
(1)
Notwithstanding any provision in the rules of a registered fund to
the contrary, the employer of any member of such a fund shall
pay the
following to the fund in full, namely-
(a)
any contribution which, in terms of the rules of the fund, is to
be deducted from the member’s remuneration; and
(b)
any contribution for which the employer is liable in terms of
those rules.
(2)
(a)
The minimum
information to be furnished to the fund by every employer with regard
to payments of contributions made by the employer
in terms of
subsection (1), shall be as prescribed.
(b)
If that
information does not accompany the payment of a contribution, the
information shall be transmitted to the fund concerned
not later than
15 days after the end of the month in respect of which the payment
was made.
[23]
Section 13 A(3) of the
PFA stipulates the peremptory timeframe within which the
contributions must be paid over by the employer
to the fund.
[24]
Section
13 A(4) of the PFA clarifies the employer’s liability to pay
what is strictly provided for in the rules  before
any amendment
relating to a reduction, suspension or a discontinuation of pension
contributions is formally processed, irrespective
of the date on
which the amendment may take effect. This reinforces the notion both
that the rules are paramount and must be formally
amended according
to the necessary prescripts before any reduction or suspension or a
discontinuation of the payment of contributions
will be of formal
effect, and that the show must go on so to speak by the payment of
contributions in the interim whatever changes
might be in the
offing.
[9]
[25]
Evidently
where the reduction, suspension or discontinuation of the payment
contributions does not entail an amendment to the Fund’s
Rules,
but is already permitted in my view in the sense that a member may
resign and be admitted as a member of another fund in
terms of a
fund’s rules, the strict obligation to pay the contributions
pending such a  process is ameliorated by a
transfer in due
course (within 60 days of the date of a person’s request to the
first fund to cease to be a member, or, if
applicable, within any
longer period determined by the Registrar on application by the first
fund) of the member’s relevant
benefit or right to that benefit
to the new fund within that envisaged period.
[10]
In other words, adjustments are made after the fact.
[26]
The minimum information
to be furnished contemporaneously with the contributions, no doubt
vital to the administration of the Provident
Fund’s business
and to give meaningful practical effect to the overall objectives of
the PFA and the necessary recordkeeping
are stated in Regulation 33
as follows:
“
33.
Requirements in terms of section 13A of Act.
—
(1)
Minimum information to be furnished by every employer to the fund
with regard to payments of contributions in terms of section
13A
(2) of the Act, shall consist of at least the following:
(
a
) Initial
Contribution Statement:
(i) Name of the fund;
identification of the fund (e.g. registration number); period in
respect of which the contribution is payable;
(ii) name and address of
the employer or pay-point which made the deduction; responsible
person to contact at the employer or pay-point;
(iii) full name, date of
birth, ID number or employer pay number, or other means of
identification, date of membership, pensionable
emoluments of member
and percentage or amount of contributions, split between member and
employer as well as an indication of any
additional voluntary
contributions paid.
(
b
) Subsequent
Contribution Statement:
In respect of
each contribution period either—
(i)
the
information required in paragraph (
a
) (
i
)
and
(ii) above and part or all of the information contained in paragraph
(
a
) (iii)
above;
or
(ii) a
reconciliation with the contribution statement for the previous
period showing any differences in the data such as additions
as a
result of new members, reductions as a result of membership
terminations, adjustments as a result of changes in pensionable

emoluments or the payment of additional voluntary contributions or
other information and corrections due to error.
[11]
[27]
The
obligation to pay on the one hand and to receive the contributions
and to account for them on the other is on the municipality
and the
Fund reciprocally. In terms of the regulations the “squeeze”
is on the Fund which is obliged to report any
non-compliance with the
provisions of section 13A, as well as on the employer.
[12]
[28]
Monitoring
functions are prescribed in Regulation 33 (2) to ensure the payment
by the municipality of the contributions and the
provision of the
relevant data so that discrepancies between initial and subsequent
contribution statements are picked up and acted
upon.  The
“monitoring person” in the fund responsible for the
oversight of these processes is obliged to report
any non-compliance
to the board of a fund which is itself obliged to take certain steps
falling short of ultimately reporting the
relevant infringements to
the Registrar, the Attorney-General and the Commissioner for the
South African Revenue Services ultimately.
[13]
[29]
It
is inescapable that the provisions of section 13 A(1) of the PFA
oblige employers to pay any contribution which in terms of the
rules
of the fund are to be deducted from members’ remuneration, as
well as any contribution for which the employer is liable
in terms of
those rules.
[14]
[30]
So
serious does the legislature regard non-compliance with the
provisions of section 13 A of the PFA that it has, with effect from

28 February 2014, declared that non-compliance with the provisions of
section 13 A of the PFA is a criminal offence for which a
guilty
party is liable to a prohibitive fine or a lengthy term of
imprisonment.
[15]
The
legislature has also imposed personal liability for non-compliance
with section 13 A of the PFA.
[16]
[31]
It
goes without saying that any failure to pay the contributions
timeously also triggers an obligation to pay interest at a rate

prescribed in the PFA.
[17]
[32]
Various provisions of
the applicant’s Rules, consonant with the relevant provisions
of the PFA, stress the obligation on the
part of the municipality to
account for contributions in respect of members and to provide the
minimum information required for
its purposes.
[33]
It is not in contention
that the applicant is an “employer” as defined in section
1 of the PFA, and (certainly was)
participating in the Fund, evident
in the regular contributions made by the municipality to it before
September 2013.
The
municipality’s pushback:
[34]
None of these
definitional elements are disputed and the relief which the applicant
seeks would not be an issue, so the municipality
contended, if the
employees were indeed members concerning whom the statutory duty was
necessary to be effected and the applicant
the relevant pension fund
entitled to contributions and information under the PFA.
However, it submitted that this is not
the case and indeed that the
applicant has made itself guilty of a willful and material
non-disclosure concerning whether the employees
were still members of
the applicant and accordingly whether the municipality owed it
contributions in respect of the employees
at all.  It contended
that the applicant disingenuously framed its application as an
attempt to compel it to comply with its
supposed statutory duties to
contribute to it and to provide information under the guise of itself
being the relevant pension fund
without disclosing the employees’
cessation of membership of the Fund and ignoring the fact that they
had purported to transfer
their membership to the MEPF from the
beginning of September 2013.  It claimed that the applicant
should have been aware of
the material dispute of fact that it no
longer enjoyed the status of being “The Fund” in relation
to the employees.
[35]
Also in dispute was the
allegation that the municipality had supposedly ignored the
applicant’s demands for payment preceding
the litigation.
This was blatantly false, so it contended, since the applicant had
instead ignored the choice of the employees
to change their pension
fund membership and had forged ahead with the litigation on the basis
of its purported entitlement to make
demands as if it were the
relevant fund.
[36]
The third basis of
opposition was the non-joinder of the second and third respondents
and the interested employees which has since
become academic.
[37]
The fourth basis for
its opposition is the Fund’s failure to have asserted any
resort before the issue of the main application
to the statutory
remedial measures provided by section 13 A(10) of the PFA, read with
Regulation 33(2)(5).  The PFA contemplates
that the
Attorney-General and the Registrar monitor the kind of complaints the
first to the third respondents say form the subject
matter of this
application yet ironically they resist the applicant’s attempts
through the application even to remediate
the situation.
[38]
As
an aside, whilst it is of concern to me that the non-payment of
contributions and the provisioning of data in this matter escaped
the
attention of these oversight bulwarks for a lengthy period of time
before the applicant commenced this litigation, I am satisfied
that
the jurisdiction of this court should not be ousted in respects of
valid and legitimate attempts by a Fund, Employer or members
alike to
enforce statutory compliance with the austere provisions of the PFA.
The applicant’s point that the provisions
of section
13(10) of the PFA in any event only came into operation on 28
February 2014
[18]
after the
bulk of the municipality’s breaches had already been committed
is also well taken.
The
applicant’s reply:
[39]
Although it appears to
me to be quite plain why this litigation was necessary, it was only
in its replying affidavit that the applicant
revealed for the first
time why in its view it could not do what the municipality had
requested it to do on behalf of the employees.
Adverting
firstly to the binding nature of the rules of the Fund on the
members, and the definition of “member” in
the PFA which
“makes it clear that membership ceases when membership has been
terminated in accordance with the rules of
the Fund,” the
applicant placed its reliance squarely on Rule 3.2 of its
Consolidated Rules, which state as follows:
“
3.2
Cessation of membership
3.2.1 A MEMBER may
not withdraw from the FUND while he remains in service.
3.2.2
A MEMBER’s membership of the FUND shall terminate on cessation
of service.”
[40]
Apart from the rule
which speaks for itself and which the applicant claims is not open to
it to ignore, additionally it asserted
that it was constrained by a
collective agreement negotiated in the South African Local Government
Bargaining Council (“SALGBC”)
which placed a moratorium
on the transfer of members between the various pension and retirement
funds operating within the local
authorities whilst in service of the
employer.  It considers the moratorium, which is currently still
in place despite being
almost two decades old already, legally
binding on it.
[41]
Since none of the
employees have ceased to be in the service of the municipality, it
thus regards them as members still and attracting
the obligations it
seeks to enforce by way of the relief claimed, although it concedes
that it is the employees’ entitlement
to join the MEPF as an
additional fund over and above their primary association with it as
members.  It claims further that
it informed the municipality in
correspondence (which was not disclosed save for the demand) that it
would not agree to a transfer
because the employees did not cease to
be members of the Fund, a fact it was made aware of “from the
outset”, and which
it elected to ignore.
The
second and third respondents’ counter-application:
[42]
The second and third
respondents, who as I have indicated above associate themselves with
the defence of the municipality to the
relief sought against it, also
filed a counter-application after the intervention in which the
following relief is sought:
“
1. to the
extent necessary, declaring that rule 3.2.1 of the SAMWU National
Provident Fund’s (“
SNPF
”)
Rules is unconstitutional and invalid;
[19]
2. directing the SNPF to take all
necessary steps to give effect to the transfer of the relevant
employees (as defined in the respondents’
answering affidavit
dated 15 January 2016 (“
the answering affidavit
”)),
in accordance with section 13A(5) of the Pension Funds Act, 1956
(“
the Act
”), including the transfer, to the second
respondent, of any benefit or any right to any benefit to which the
relevant employees
had become entitled in terms of the SNPF’s
Rules, including interest, within 30 days of the granting of this
order;
3.
alternatively
,
an order directing the SNPF to take all necessary steps contemplated
in section 14 of the Act, read with Pension Fund directive
6 issued
by the Registrar of Pensions Funds, including the steps outlined in
paragraph 54 of the answering affidavit, to ensure
that the assets
and liabilities attributable to the members are transferred to, and
vest in, the second respondent within 30 days
of the granting of this
order; and
[20]
4. granting further
and/or alternative relief.”
[43]
The second and third
respondents filed the relevant notice in terms of Uniform Rule 16 A
in respect of the issue in relation to
the constitutionality of Rule
3.2.1.  They contend in it that the constitutional challenge is
premised on the argument that
the sub-rule, to the extent that it
prohibits transfers of the applicant’s members to other funds
while they remain in service
of the municipality, is unenforceable
and invalid for being against public policy and inconsistent with the
employees’ rights
to freedom of association and its own right
to freedom of trade pursuant to the provisions of sections 18 and 22
respectively of
the Constitution of the Republic of South Africa,
1996 (“the Constitution”).
[44]
No
amicus
took up the invitation to be admitted as an interested party to the
proceedings.
The
second and third respondent’s collateral challenge:
[45]
The relief sought by
the second and third respondents was amplified by a further proposed
notice of motion (the “collateral
challenge”) filed by
them (after the joinder of the rest of the respondents) in the
following terms and ostensibly in the
light of the purported meaning
of Rule 3.2.1 contended for by the applicant:
“
1. Declaring
each of the Rule decisions (as that term is defined in paragraph 8 of
the additional affidavit) unreasonable, irrational,
unlawful and
invalid, and ordering that Rule 3.2.1 (as that term is defined in
paragraph 6 of the additional affidavit) is reviewed
and set aside;
2. that, in the
event that any party opposes the relief sought herein, such party
bears the second and third respondents’
costs, including the
costs of two counsel.”
[46]
It is necessary,
briefly, to advert to the gist of the second and third respondent’s
challenge in this regard.  In the
one respect they say that “it
has become apparent” that the rule itself “is also
unreasonable, irrational and
unlawful and should be set aside”.
They offer the “collateral review” as a further defence
in the main
application to the applicant’s claim that the
municipality should be mandated to comply with its statutory
obligations to
pay over the employees’ contributions to it in a
scenario where the employees have indicated a preference to resign as
members
of the applicant.  But what they contend is reviewable
in paragraph 8 of the supplementary affidavit referred to is “the

Rule’s enactment and (the Applicant’s) failure to date to
delete the Rule by the time that the employees sought to
transfer to
the MEPF in 2013 (collectively, “the
Rule
decisions
”)”.
[47]
Leaving aside the
burgeoning relief introduced in this awkward manner six weeks before
the matter was due to be argued, whereas
the issues were crystalized
by June 2016 already, it is not entirely clear what is sought to be
set aside as the “Rule decisions”.
No information
was offered by it concerning the original enactment of the
contentious rule.  Moreover, its gripe, as fleshed
out in the
supplementary affidavit, appears to concern itself (in their view)
more with the unacceptable reasons advanced by the
applicant for
“prohibiting transfers by way of Rule 3.2.1, in other words,
the “reasons for the Rule Decisions”.
There is a
suggestion further that the two respondents have an issue with the
Rule being maintained presently on the basis of irrelevant

considerations, as a self-standing ground, but no attack is directed
at the board of trustees’ decision (inasmuch as one
can call it
a formal “decision” or “decisions”) taken at
the time to ignore the municipality’s request
to recognize the
purported resignations of the employees from their membership of the
applicant.
[48]
The respondents purport
to seek condonation for the late bringing of the PAJA/legality review
but fail to even suggest when it would
have been reasonable to
institute such a review or to account for the lengthy delay since
such date. The Rule Decisions”
(as defined by them) would have
been known to them at least by the date of their intervention in the
proceedings but they simply
skirt around this aspect.
[49]
In any event and far
more critically, they fail to assert on what basis they have any
standing (in the main application in which
relief is sought against
the municipality only) to mount the supposed review as the prejudice
would have redounded to the employees
and not to the MEPF by the
“Rule decisions”.
[50]
Their own parochial
interest in being unhappy with the Rule’s enactment or the
reasons given by the applicant for its enactment
and maintenance
thereof certainly does not cut it.  If they purport to bring the
collateral challenge on behalf of the employees,
they do not say so
pertinently neither do the circumstances suggest that the employees
are even aware of the challenge.  Since
the employees were
joined by the applicant at the prompting of the second and third
respondents and cited as “respondents”
rather than as
interested parties, it cannot simply be assumed that they stand
opposed to the relief sought in the main application.
The additional
supplementary affidavit in which the collateral challenge is asserted
was ostensibly not even served on the fourth
to one hundred and
twenty eighth respondents, and the reply thereto by the applicant
served on Messrs. Webber Wentzel as if the
employees’ interests
were common with the other respondents which they may or may not
necessarily be.
[51]
I return to deal with
the issue of standing in respect of the counter-application on behalf
of the employees again later, but suffice
it to say there was simply
no basis in my view for the second and third respondents to add the
further desperate string to their
bow by the ill- conceived and
poorly justified late application termed the “collateral
challenge”. In any event, as
indicated above, assuming the
interpretation of Rule 3.2.1 contended for by the applicant, and the
absence of anything other than
an informal request by the
municipality on their behalf to recognize their election  and
have their benefits paid over to
the MEPF, there would appear to be
no legal basis upon which the municipality could refuse to pay over
the contributions it was
statutorily obliged to in respect of the
relevant period.
[52]
In my view the
alternative relief sought by the second and third respondents in
their counter-application suggests their acceptance
that a formal
process is required to transfer the employees’ monies out of
the fund, even assuming an entitlement on the
part of the employees
to resign their membership of the applicant whilst still in service
of the municipality.  This must
be so because the second and
third respondents have not sought a declarator in the
counter-application to the effect they are entitled
to the monies
already paid to them as the purported Fund by the municipality since
September 2013.  To the contrary, they
thankfully appear to
accept that if the “main issues” are determined in favour
of the applicant, it would have the
effect of “divesting them
of any entitlement to the contributions received and administratively
exercised since September
2013”.
[53]
Given
the second and third respondents implied concession that a formal
transfer process is necessary in any event, and the clear
objective
of section 13 A(4) of the PFA that amendments to the rules of a Fund
impacting on the reduction or suspension or discontinuation
of the
payment of contributions should not affect any liability to pay until
a formal resolution concerning that amendment has
been effected, the
only way in which the issue of the applicant’s entitlement to
the contributions and administration prospectively
(after a formal
transfer process), might be impacted is if the interpretational issue
goes against it or this court declares the
rule invalid or
unconstitutional and directs it to amend its rules accordingly.
[21]
Transfers
of membership and benefits:
[54]
I
have already dealt above with my understanding of the effect of the
provisions of sections 13 A(5) and 14 of the PFA.  The
court in
Chemical Industries National Provident Fund v Sasol Limited &
Others
[22]
had reason to deal
with the issue of the “transfer” of members from one fund
to another.  Firstly the principle
is stated that transfers, if
permissible, ensue in accordance with the strict provisions of the
relevant fund’s rules which
it is trite in matters of this
nature are binding on the Fund itself, its board, its members and any
employer who participates
in the Fund.
[23]
Any act which is implemented outside the ambit of the rules, is
ultra
vires
and null and void.
[55]
Where the rules do
provide for the transfer of members or their benefits to the
transferring fund, there are further two discrete
processes
applicable, the first being the process provided for in the rules for
the transfer of the members from the first fund
to the transferring
fund or the cessation of membership (the substantive enabling
provision so to speak) and, secondly, the process
relating to the
transfer of assets and liabilities that flow from the “transfer
of membership” or cessation of membership
as the case may be.
The latter process is premised upon the requirements of section 14 of
the PFA, but not the former.
[56]
Section 14 specifically
applies to transfers of assets and liabilities (or the “business”)
from the Fund to another.
[57]
Members may thus
(substantively) cease to be members of one fund when they become
members of the other fund, or not, depending on
what the rules
provide in this respect, but the transfer of business, assuming this
is to happen in terms of the permitted transfer,
happens
independently of the first process although theoretically the
transfer of members may be linked or related to the process
of the
transfer of assets and liabilities as envisaged in terms of section
14 of the PFA, especially where the rules of the first
fund provide
that the transfer of a member is subject to compliance with section
14 of the PFA.  The court has however stressed
that the two
processes are “notionally autonomous processes”.
[58]
The
Supreme Court of Appeal in Sasol Ltd and Others v Chemical Industries
National Pension Fund
[24]
upheld an appeal against the finding of the Local Division of the
Gauteng High Court confirming the principle that section 14 does
not
regulate the transfer of members, but rather the transfer of assets
and liabilities of members.  It said that “members
do not,
strictly speaking, transfer between funds.  They withdraw from
one and join another”.
[25]
[59]
The relevance of the
observation in the peculiar circumstances of that matter is that the
Supreme Court of Appeal was able, based
on an interpretation of the
relevant rules of the fund, to find that the transfers applicable in
that matter were subject to the
provisions of section 14 of the PFA
as a distinct process and that the employer’s contributions
would cease only from the
“effective date of transfer as
specified in the section 14 documentation”.  Until that
was done, and the trustees
had specified an effective date in it, the
employer’s contribution to the first fund had to continue.
[60]
The relevance for
present purposes is that it would be premature to speak of a section
14 transfer unless the applicant’s
Rules could be construed in
favour of allowing the employees to resign their membership while in
service of the municipality, as
a first step or a pre-cursor to the
transfer of assets and liabilities which would necessarily follow
afterwards.
[61]
Leaving
aside for the moment the possible confusion created by the provisions
in paragraph 11.11.1 of the applicant’s Consolidated
Rules
[26]
that appear to endorse or permit the transfer of members from the
applicant as a general premise, it is clear, for the moment at
least,
that the provisions of section 14 are not yet of application and that
neither the municipality nor the members can insist
on being excused
from their obligation to pay their contributions to the applicant
since the “effective date of transfer”
has yet to be
determined.
[62]
Even assuming that I am
wrong in finding that section 13 A(5) of the PFA, included among a
number of sub-paragraphs that deal with
the payment of contributions
and certain benefits to pension funds, does not as a general premise
permit transfers of members who
wish to voluntarily resign, again it
would be premature for the first fund to stop making contributions
before the requisite pre-conditions
have been met which on anyone’s
version in
casu
has not happened by any stretch of the imagination.
The
interpretational issue:
[63]
The main issue to be
determined presently then is whether Rule 3.2.1 prohibits the
transfer of the employees from the applicant
to the MEPF as contended
for by the applicant.
[64]
It
is trite that the Rules of the pension funds are the main source of
rights and obligations that regulate the relationship between
the
fund and its members.  The board of a fund can therefore
generally only allow a person to become a member and similarly
also
consider cessation of membership in the said find if so authorized by
the rules of the fund.
[27]
[65]
The Rules of a Fund
form its constitution and must be interpreted in the same way as all
documents.
[66]
The
proper approach to be adopted in respect of the interpretation of
documents was summarized by the Supreme Court of Appeal in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[28]
as follows:
“
[18]
Over the last century there have been significant developments in the
law relating to the interpretation of documents, both
in this country
and in others that follow similar rules to our own. It is unnecessary
to add unduly to the burden of annotations
by trawling through the
case law on the construction of documents in order to trace those
developments. The relevant authorities
are collected and summarised
in
Bastian
Financial Services (Pty) Ltd v General Hendrik Schoeman Primary
School.
The present state of the law can be expressed as follows.
Interpretation is the process of attributing meaning to the words
used
in a document, be it legislation, some other statutory
instrument, or contract, having regard to the context provided by
reading
the particular provision or provisions in the light of the
document as a whole and the circumstances attendant upon its coming
into existence. Whatever the nature of the document, consideration
must be given to the language used in the light of the ordinary
rules
of grammar and syntax; the context in which the provision appears;
the apparent purpose to which it is directed and the material
known
to those responsible for its production. Where more than one meaning
is possible each possibility must be weighed in the
light of all
these factors. The process is objective not subjective. A sensible
meaning is to be preferred to one that leads to
insensible or
unbusinesslike results or undermines the apparent purpose of the
document. Judges must be alert to, and guard against,
the temptation
to substitute what they regard as reasonable, sensible or
businesslike for the words actually used. To do so in
regard to a
statute or statutory instrument is to cross the divide between
interpretation and legislation. In a contractual context
it is to
make a contract for the parties other than the one they in fact made.
The ‘inevitable point of departure is the
language of the
provision itself’, read in context and having regard to the
purpose of the provision and the background to
the preparation and
production of the document.”
[29]
[67]
The applicant contends
that its interpretation of the contentious Rule (read together with
sub-rule 2), namely that it precludes
the cessation of membership of
employees while in the service of the municipality, is to be informed
by two significant developments
bearing upon the prohibition by way
of background facts.  The first is the moratorium of the SALGBC
referred to above on transfers
between retirement and medical funds
by employees of municipalities.  The moratorium is alleged to
have been negotiated in
the Bargaining Council and the decision taken
in 1998 by elected representatives of the employee trade unions.
The applicant
considers itself bound by the moratorium even though,
it is common cause, the collective agreement has not been
incorporated in
its consolidated Rules.
[68]
The second is that the
prohibition was deliberate to accord with the definition in the
Income Tax Act, no 59 of 1962 of a “Pension
Fund Organisation”,
more particularly the proviso which requires that the rules of such a
fund,
bona fide
established solely for the purpose of providing benefits for
employees on retirement etc, provide that “membership of the

fund throughout the period of employment shall be a condition of the
employment by the employer of all persons of the class or
classes
specified therein who enter his employment on or after the date upon
which the fund comes into operation”.
[69]
In my view on a simple
reading of the latter definition it is the membership of such a fund
and not a single fund serving the needs
of those employees as a
condition of employment that is being described.  Absent any
evidence as to a condition of employment
limiting the employees’
association to the applicant only as being “The Fund”, it
has no bearing as a background
fact.  Indeed, the fact that the
applicant’s Rules suggest that there are other “approved
funds” in the
mix from which employees can transfer to it, must
mean that more than one fund was put in place to meet this objective.
[70]
As for the established
moratorium, the second and third respondents do not dispute its
existence, only that it does not have the
force of law.  It is
therefore a relevant background fact for present purposes.
[71]
It is further necessary
to have regard to some of the other provisions in the Rules that give
a context to the interpretation of
the contentious Rule 3.2.1.
[72]
Firstly,
under eligibility in the Schedule of Benefits, membership requires
persons to be members of the Union
[30]
“who have not attained the normal retirement age”,
provided that “the Board shall have the right to allow
employees
of the employer who are not members of the union, who have
not attained the normal retirement date, and who are not members of
another Approved Fund, to qualify for membership” and that “any
of the membership requirements above may be waived by
the Board”.
[73]
The only pre-retirement
benefits are death and disability, and then “withdrawal
benefits”. The events envisaged here
giving rise to  a
claim for benefits are resignation, dismissal and retrenchment.
[74]
“
Approved Fund”
is defined to mean “a provident, pension or retirement annuity
fund that has been registered in terms
of the (PFA) and approved by
the Commissioner, other than an APPROVED PRESERVATION FUND”.
[75]
The latter fund means
“a preservation provident fund as contemplated in RF1/98,
approved as such by the COMMISSIONER and in
which the EMPLOYER has
agreed to participate”.
[76]
An “eligible
employee” is defined as one “who satisfies the membership
conditions in the Schedule (of benefits)”.
[77]
“
EMPLOYER”
means the participating employer or any subsidiary concern that
participates in the Fund.  In relation to any
member, EMPLOYER
means “the employee in whose SERVICE the MEMBER is at any
time”.
[78]
ENTRY DATE means “the
participation date for all eligible employees existing at the
participating date” - I would assume
union members as a basic
premise or category, and further “shall mean the first day of
the month co-inciding with or next
following the first day of
employment for new eligible employees entering into the employment of
the employer after the participation
date”.
[79]
The Fund is defined as
the applicant itself.
[80]
Member “means any
eligible employee who has been admitted to membership of the FUND in
terms of these rules and who has not
ceased to be a member of the
FUND”.
[81]
PARTICIPATION DATE
“means the date from which an employer or class of employees
participates in the fund”.
[82]
PREVIOUS FUND means a
retirement fund in which a municipality participates as an employer,
registered in terms of the PFA and recognized
and approved as a
pension or a provident fund in terms of the Income Tax Act.
[83]
“
SERVICE means
active, permanent employment with an employer for not less than
twenty hours per week.”
[84]
MEMBERSHIP is dealt
with in Rule 3 as follows:
“
3.1
Conditions of membership
3.1.1 An ELIGIBLE
EMPLOYEE entering SERVICE on or after the PARTICIPATION DATE shall,
save as is provided for in Rule 3.1.2 below,
become a MEMBER of the
FUND as from the first day of the month coinciding with or next
following the date on which he/she fulfills
the membership conditions
in the SCHEDULE.
3.1.1 An ELIGIBLE EMPLOYEE who is in
SERVICE on the PARTICIPATION DATE but who is not yet a MEMBER of the
FUND shall have the option:
(a) to become a
MEMBER of the FUND on that date, or
(b) to become a
MEMBER of the FUND within twelve months after the PARTICIPATION DATE,
or
(c) to waive
his/her right to become a MEMBER of the FUND.
Provided that an
ELIGIBLE EMPLOYEE who fails to join the FUND within twelve months of
the PARTICIPATION DATE or who waives his right
to join the FUND shall
not be entitled to join the FUND at a later date.
[31]
3.2
Cessation
of membership
3.2.1 A MEMBER may not withdraw from
the FUND while he remains in SERVICE.
3.2.2 A MEMBER’S
membership of the FUND shall terminate on cessation of SERVICE.”
[85]
Allowance is made for
temporary absence from service in Rule 3.3 at the discretion of the
Board up to a maximum period of twenty-four
months, where after the
member’s service shall be deemed to have terminated.
[86]
Transfers are made
provision for from PREVIOUS FUNDS AND APPROVED FUNDS.
[87]
There is a further
requirement regarding members that they must at commencement of cover
and critical change of events be actively
at work.
[88]
Members
may make contributions to the Fund over and above the compulsory
deductions specified in the schedule and “with the
agreement of
the Fund make voluntary contributions by way of a lump sum to which
he became entitled on his withdrawal from another
approved Fund
subject to the requirements of the Registrar and the Commissioner
[32]
and any additional amounts in respect of any period of previous
service with the employer, or another employer, not otherwise
recognized for the purpose of calculating his benefits under the PFA.
[89]
Under
“payment of contributions” in Rule 4.4.2 it is provided
that “the last contribution in respect of a member
shall be due
on the last day of the month in which his service terminates”.
[33]
[90]
The Rules then go on in
paragraph 5 to specify the nature of benefits payable on retirement
date in a lump sum including normal
retirement, early retirement,
ill-health retirement and late retirement.  Death and disability
benefits are then spelt out
as separate events.
[91]
Withdrawal benefits are
dealt with in Rule 8.1 as follows:
“
8.
WITHDRAWAL BENEFITS
8.1 Cash benefit
8.1.1 A MEMBER who
resigns, is dismissed or is RETRENCHED, and who does not qualify for
a retirement benefit, shall be termed a
withdrawing MEMBER and shall
be paid the withdrawal benefit specified in the SCHEDULE in cash.
8.2 Preserved
benefit
8.2.1 A withdrawing
MEMBER may choose in place of a cash payment as set out above to have
a preserved benefit.  In this case
the MEMBER’S cash
benefit will be transferred to an APPROVED FUND, including an
APPROVED PRESERVATION FUND in which the EMPLOYER
has agreed to
participate prior to the MEMBER’S date of resignation,
dismissal or RETRENCHMENT, as the case may be.”
[92]
It appears from the
provisions of Rule 8 that an election is exercised by a withdrawing
member to place his funds elsewhere in an
approved fund or APPROVED
preservation fund.  (This appears to be the only mention of a
transfer
from
the applicant fund which gives the provisions of Rule 11.11.1 dealing
with transfers from the applicant its utility apart from

amalgamations proper or large scale transfers of any portion of its
business to another pension fund organisation.)
[93]
It is so that the word
“withdrawal” is used several times in the rules, each in
a somewhat different context or nuance,
but in an overall context of
the consolidated Rules, the objectives of the applicant’s
establishment and nature as a pension
fund, and the limited
background facts that have been provided, resignation from the fund
as a withdrawal event whilst still in
service (as opposed to a
withdrawal from the service of the municipality) is consciously
disavowed.
[94]
The reason or
motivation for the so-called prohibition is not indicated in the
Rules itself, but then neither does it have to be
to discern that a
cessation of membership from the applicant is not possible for so
long as the employer remains in service of
the municipality.
[95]
The
second and third respondents latched on to a recently delivered
judgment in SAMWU National Provident Fund v Umzimkhulu Local

Municipality & Others
[34]
in which the very sub-rule of the applicant was under scrutiny to
offer an alternative interpretation that the prohibition against

withdrawal specified in Rule 3.2.1 means simply that a member may not
cash in his benefits whilst in service.
[96]
The facts of the matter
are on all fours with the present matter in the sense that in that
scenario a group of employees, (still
in service of the relevant
municipality) also purported to transfer their pension membership to
the MEPF.  In that matter
the affected employees also contended
that the rule (inasmuch as it prohibits a member from transferring to
another pension fund
while remaining in service) is unenforceable and
unconstitutional.  The very same moratorium also reared its head
but its
relevance (and the non-joinder of the SALGBC taken as a
preliminary point as in
casu
)
was put aside as being unnecessary to determine whether the rule
should be declared unconstitutional or not.
[97]
What
emerges from the judgment is that transfers between Funds in the
local government industry and where the applicant and the
second
respondent have been players has long been an issue.  Indeed the
subject of such transfers also received the attention
of the Pension
Fund Adjudicator who ruled in Mtyapha v SAMWU National Provident
Fund
[35]
that such a
prohibition (as contained in the collective agreement which I assume
deals with the moratorium) is contrary to the
rules and therefore
unenforceable and that the complainant was entitled to transfer his
fund value to a local authority fund of
his choice in terms of the
provisions of the approved rules of the local authority fund
concerned, but that determination was set
aside by the South Gauteng
High Court, albeit on a default basis.
[36]
[98]
It appears from the
Umzimkhulu judgment that the court was taken up with the submission
put forward by the Fund’s counsel
that the adjudicator’s
interpretation that Rule 3.2.1 refers only to a situation where the
employee seeks to withdraw (rather
than transfer) his benefits whilst
remaining in employment is a correct one, leading it to find that
Rule 3.2.1 “does not
prevent (the employees) from transferring,
it merely prevents them from withdrawing their funds”.
[99]
I refer to the court’s
reasoning in paragraphs [18] to [20] as follows:
“
18. It
cannot be disputed that the rationale behind Rule 3.2 is to ensure
that members have sufficient savings at retirement.
That is in
any event one of the main aims of contributing towards a pension
fund.  There is accordingly no need to analyse
the reason for
pension fund contributions.
19. Rule 3.2.1
clearly states that a member may not withdraw from the Fund while he
remains in service.  This is unambiguous
and rightly protects
the member in terms of pension benefits upon retirement.
20. In my view the
Adjudicator in MTYAPHA correctly interpreted Rule 3.2 as follows:
“
5.5The
rules of the respondent that deal with termination of membership and
transfers from the respondent are rules 3.2 and 11.11
respectively.
Rule 3.2 of the rules of the respondent regulates cessation of
membership …
5.6
The complainant is currently employed by the employer and an active
member of the respondent. Therefore, the complainant is
not entitled
to withdraw from the respondent while he still remains in the service
of the employer in terms of rule 3.2 above.
The question which arises
is whether or not rule 3.2 contravenes the constitutional right to
freedom of association. Section
18 of the Constitution of the
Republic of South Africa, 1996 ("the Constitution")
provides that everyone has the right
to freedom of association. Rule
3.2 clearly has the effect of compelling members of the respondent to
remain its members against
their will as long as they are still in
service.
5.7
Notwithstanding the infringement of the right of freedom of
association, it still remains to be established whether or not it
is
justifiable. Section 36 of the Constitution permits a limitation of
rights in terms of a law of general application, to the
extent that
the limitation is reasonable and justifiable in an open and
democratic society based on human dignity, equality and
freedom.
There must be a rational basis for the limitation of a right
(see
Sebola v Johnson Tiles
(
Pty
)
Ltd
and others
[2002] 3 BPLR 3242 (PFA) at 3249F–G). The
limitation must serve a legitimate objective and the means to achieve
that objective
must be reasonable and rationally connected to it.
5.8
The restriction imposed by the provisions of rule 3.2 is not
unreasonable or unconstitutional. It merely prohibits a member
of the
respondent who has not resigned, nor been dismissed nor retrenched
from cashing in his fund value while he is still in service.
The
rationale behind is to ensure that members have sufficient savings at
retirement. As a Bargaining Council, the SALGBC is entitled
to
regulate the activities of its participants which includes,
inter
alia
, imposing restrictions that have legitimate objectives. The
provisions of rule 3.2 do not prohibit transfers of members from the

respondent to another approved pension fund. The complainant has not
requested payment of his withdrawal benefit, instead a transfer
of
his benefit to another approved municipal pension fund.
5.9
Since the complainant's request is to transfer his fund value to
another municipal pension fund in which his employer

participates, the appropriate rule of the respondent that deals with
transfers from the respondent is rule 11.11 …”
”
[100]
The court yet went on
to conduct a constitutional review of the rules despite endorsing the
PFA’s interpretation of the contentious
rule rendering it
superfluous or as presenting no encumbrance to the proposed
transfers.  The court held as follows in this
respect, without
really saying why it was constrained to uphold the constitutional
argument:
“
I am
correctly satisfied that Rule 3.2 does not prohibit contributors from
transferring to another fund which offers better benefits.
To
hold that it prohibits transfers between funds would be
unconstitutional, contrary to public policy and not economically
expedient.
It would further not allow contributors the freedom
to seek out better retirement options for themselves.”
[101]
Ignoring the proverbial
elephant in the room, or rather attenuating what Rule 3.2.1 means,
the court found the answer for memers’
dilemma in Rule 11 of
the applicant’s Consolidated Rules.  It concluded that
this rule deals with transfers although
qualifying that it sets out
“the procedure when any portion of business of the fund
‘transferred … to any other
approved fund’”.
It justified the employees’ entitlement to rely on this rule on
the basis that they “sought
to transfer their funds to an
approved Fund”, rather than seeking “to withdraw their
benefits”.
[102]
This is an artificial
approach in my view as it ignores the real meaning of Rule 3.2.1
which in my view prohibits the Fund from
doing what the municipality,
the employees and the competing Fund seek to achieve, which is a
cessation of membership whilst the
employees remain in service of the
employer.
[103]
Further, it provides no
tangible solution to give Rule 3.2.1 the meaning that only a cashing
in of benefits is contemplated (especially
since it must of necessity
be read with Rule 3.2.2 and in the context of the Consolidated Rules
as a whole) and then artificially
to look to Rule 11 as
providing a self-standing basis for a transfer whereas that sub-rule
clearly deals with the second discrete
process of transferring the
member’s share in a scenario where the Rules permit or require
it.  It obscures and detracts
from the real conundrum which is
that members may not in terms of Rule 3.2 cease to be members while
in service of the municipality.
Any transfer contrary to what the
Rules allow is
ultra
vires
even if the
applicant’s Rules provide for the
manner
in which a member’s share is to be transferred where it may or
must. In my view this might be where a member elects not to
cash in
withdrawal benefits but to place them with an approved fund, or a
large-scale transfer of any portion of any of the business
of the
applicant or an amalgamation with any other approved fund, business
or organization in the usual business sense of that
word.
[104]
In any event, if Rule
3.2.1 is supposed to mean what the court found in Umzimkhulu then one
has to read in the phrase “his
benefit” to qualify the
object that may not be withdrawn from the fund.  But instead the
withdrawal that is censured
is the member’s withdrawal of
himself from the fund, as a member, whilst he remains in service.
Immediately one read
this with the heading “Cessation of
Membership” and the provisions of Rule 3.2.2 which clarifies
that that eventuality
will not take place until cessation of service,
the prohibition becomes abundantly clear and is consistent with the
general tenor
of the instrument that any exit or withdrawal from the
fund, save in respect of the defined events, cannot take place unless
it
equates at the same time to a termination of service.
[105]
I was advised
incidentally that leave to appeal against the Umzimkhulu judgment has
been sought.  Whatever the outcome of that
application, and
until the Supreme Court of Appeal says differently I am not inclined
to follow it for the reasons indicated above,
neither is it binding
on this court.
[106]
The
answer, such as it is, to this predicament that transfers of
membership to the MEPF by members who still remain in service of
the
municipality cannot be countenanced in terms of the applicant’s
Rules, is that moral persuasion should be brought to
bear on the
applicant to change its Rules to bring them into modernity and
economic freedom so that members can have an election
to transfer
their membership and benefits between funds on an acceptable basis.
It seems from what I have read that this
vexed issue has been around
for a while and has even been reflected on by the Supreme Court of
Appeal as constituting a “turf
war” between the funds
vying for the employees’ business.  If one remains
vigilant about understanding that the
interests of the frustrated
employees lie at the heart of this issue, and that the express object
of a provident fund is to provide
for their benefits in the manner
directed in the Rules and pension laws, it should not be hard to
imagine the direction these “wars”
should be taking.
The frightening prospect of the costs of litigation in various
matters and complaints is enough in my view
to give the impression
that the interests of the very persons who the legislations exists in
respect of may be compromised by crippling
frees incurred under the
guise of conducting the ordinary business of the Fund.  It
appears that several determinations by
the PFA in favour of allowing
transfers (or rather interpreting the contentious Rule 3.2.1 in
favour of the MEPF) have been challenged
by the applicant whilst
ignoring the simmering undercurrents.
[37]
The
constitutionality argument:
[107]
That brings me to the
next issue which is the conditional constitutional challenge raised
in the counter-application.  Is the
rule, which I find does
prohibit the transfer of the municipality’s employees to the
MEPF whilst they remain in service of
the municipality,
constitutionally valid?
[108]
In this respect there
is merit in the applicant’s observations that the second and
third respondent’s constitutional
challenge suffers from a
defect in that they do not have the requite standing to bring it on
the back of the various employees’
right to freedom of
association.  The applicant contends that the respondents act in
their own interests in the present application,
which interest is not
coterminous with that of the various employees.
[109]
I am inclined to agree,
having regard to my comments above, more especially the fact that the
second respondent has continued to
hold on to the contributions paid
by the employees and on their behalf by the municipality despite
becoming aware of the launch
of this application and of the
applicant’s stance that it is legally obliged to do what it
must to correct the situation
by the absence of the payments and the
furnishing of the necessary data.  Instead the second and third
respondents, without
seeking a declarator that the MEPF was entitled
to this assumption or to collect the contributions, intervened
expressly on the
basis that the members were now its members and that
the municipality, which it should not be encouraging to cease its
statutory
obligations, should be absolved from the statutory
infringements it has willfully made itself guilty of.  In this
respect
there is truth in the assertion that the municipality’s
conduct, at the second respondent’s persuasion it seems, is

brazen.
[110]
Moreover, rather than
seeking the employees’ intervention along with their own, the
second and third respondents ironically
took on the applicant for
failing to recognize their interests in respect of the main
application and caused them to be joined
in the proceedings on this
basis.
[111]
I have already alluded
in a footnote above to the fact that the lists of employees cannot be
reconciled.  It was additionally
casually alleged by the
municipality that after these proceedings were launched twenty-three
more employees purported to resign
their membership of the applicant
and to join the MEPF.  The number of employees affected also
therefore cannot be reconciled,
neither is it evident when these
resignations happened so as to understand who the category of persons
are who are or were affected
and how the latter group comes to be
associated with the initial group listed by the applicant in annexure
“SAM 3”
to its founding affidavit.  The municipality
averred that these employees had signed individual resolutions
recording their
intent or desire to move their membership and
benefits to the second respondent, but these documents were not put
up in support
of the respondent’s alleged interest in the
matter.  The easiest thing would have been to request each of
the employees
to depose to a supporting affidavit confirming their
interest in opposing the relief sought by the applicant and putting
their
efforts behind those of the second and third respondents in
requesting the conditional relief sought in the counter-application,

but this did not occur.  The second and third respondents appear
to suggest that because they were joined in the litigation
and served
(with what must have been voluminous papers in the English language
which they probably do not understand and trawling
way beyond what
was the original issue between the applicant and the municipality)
and have not offered any retort, they necessarily
associate
themselves with the relief sought by them. I do not think so.  I
have referred above to the fact that the second
and third
respondent’s purported to introduce the collateral challenge
without ostensibly even copying the employees in.
Given the
lengthy lapse of time since this litigation commenced I cannot even
assume that they still want to transfer their membership
and benefits
to the second respondent.
[112]
In
Oostelike Gauteng Diensraad v Transvaal Munisipale Pensioenfonds
[38]
the court dealt with section 79ter of (Transvaal) Ordinance 17 of
1939 which required all local authorities not subscribing to
separate
funds to be associated with a joint pension fund.  Certain
members of the first respondent in that matter tried to
transfer to
other pension funds, but the first respondent refused the transfers.
On behalf of the employees it was
inter
alia
contended that the obligation to remain associated with the first
respondent infringed their constitutional right to freedom of

association.  The court held that the applicant, being a
services council, cannot advance constitutional rights on behalf
of
the members, and that the services council itself does not have a
constitutional right of freedom of association which has been

infringed.  The same reservation applies here.  The
infringement if it were to be recognized would be that of the
employees
and not the second and third respondents, which the latter
are purporting to advance on their behalf without proof even of their

putative membership of the MEPF or indeed any introspection of their
peculiar interests. Their assertion that because the employees
have
not pertinently opposed the relief sought by them they necessarily
associate themselves with it is simply untenable, especially
where
the applicant has firmly placed their
locus
standi
to represent them in contention on the papers.
[113]
Co-incidentally, whilst
the court in Oostelike Gauteng Diensraad did not decide the issue as
to whether the right to freedom of
association of a member of a
pension fund had been infringed in such circumstances one way or the
other, for lack of legal standing,
it set out the general principles
in matters where an application is based on the right of
association.  It appears that such
a challenge cannot only be
based on financial considerations, but that here should be a “further
dimension” (i.e. considerations
of freedom of thought, of
conscience, or of religion or, freedom of expression).
[114]
Also,
in Municipal Employees Pension Fund v Natal Joint Municipal Pension
Fund (Superannuation) and Others
[39]
the Supreme Court of Appeal, in which matter the court referred to
the posturing between the competing funds operating in KwaZulu
Natal
as a “turf war”, considered, loosely, the right to
freedom of association that was raised in that case.
The SCA
held that there was nothing in the applicable legislation or
regulations which prohibited association with funds other
than the
listed funds, of which the MEPF was not one. in addition to the
listed funds.
[40]
[115]
The point is that each
of the employees would have been given the option at the relevant
time to make their decision (one hopes
an informed one) about which
fund to associate themselves with.  The fact that they must
associate themselves with an approved
fund the municipality
participates in as a condition of their employment is in any event a
unique feature of a Pension Fund Organization
as defined in both the
PFA and the ITA and is not in itself objectionable.
[116]
The question of the
infringement of the second (and third) respondent’s right to
trade being “infringed” by provisions
in the applicant’s
Consolidated Rules which dictate that members may not cease to
members of it for so long as they remain
in service of the
municipality, does not even arise in my view as nothing stops the
MEPF from trading, or even inviting the employees
to sign on as
members additional to their primary membership with the applicant.
[117]
It is to be recalled
that it is not a deprivation of this freedom that sent them scurrying
to protect their interests in this litigation
but their incorrect
understanding of their professed entitlement to gain the employees as
members by the simple fiat of their say
so and without any
formalities in an industry that is stringently regulated in the
interests of the employees.
[118]
The further point
raised by the applicant that the MEPF has a similar Rule to Rule
3.2.1 of the applicant’s which precludes
membership hopping and
that they can hardly cry foul for this reason, is in my view also
taken well.
[119]
Having expressed a view
on the constitutional issues above this is not to say that in a
properly motivated challenge the employees
and/or pension funds
hoping to secure their membership might not succeed in having all the
rules bearing on the issue declared
unconstitutional or invalid.
It is however not proper for this court to make a definitive finding
in these respects absent
the necessary
locus
standi
of the
second and third respondents to represent the interests of the
employees.
Conclusion:
[120]
In the premises it
appears to me to be necessary to grant the applicant the relief it
seeks on the basis as framed below and to
dismiss the
counter-application with costs.  Since the intervention
application was premised on the second and third respondent’s

mistaken premise that the employees had transferred their membership
and/or benefits to it, the costs of that application should
similarly
go to the applicant.
[121]
Although the applicant
prayed for costs on a punitive scale I am not in agreement that the
circumstances warrant such an award.
In my view both the
applicant and the municipality, spurred on by the second and third
respondents, have exhibited a certain stubbornness
about the impasse
in this matter which should have been resolved ages ago in the
interests of the employees.
[122]
Incidentally, although
the applicant delayed substantially before seeking the relief which
it did in the main application I do not
agree that it would be
appropriate to non-suit it for such a reason because the
infringements that the municipality has made itself
guilty of are
serious and ongoing. Further, although it ostensibly did not disclose
the “dispute”, that dispute was
ultimately not of any
moment at the end of the day and would not have ameliorated the
municipality’s obligation to comply
with the strict prescripts
of the applicant’s Rules or the relevant provisions of the PFA
and regulations.  A risk averse
assessment of what was at stake
in resisting the inevitable relief sought against the municipality
should have persuaded the second
and third respondents that this was
not an appropriate matter in which to coincidentally test its own
interests.
[123]
In the premises I issue
the following order:
1.
The first respondent is
to furnish to the applicant, within seven days of the granting of
this order, all the information set out
in regulation 33 of the
Pensions Fund’s regulations (published under GN R 98 in GG 162
of 26 January 1962, as amended) read
with section 13 A(2) of the
Pension Funds Act, No. 24 of 1956
, pertaining to the employees listed
in annexure “SAM 3” to its founding affidavit, in respect
of the period September
2013 to date, more particularly:
1.1
The “initial
contribution statement” referred to in regulation 33 (1)(a) of
the Pension Funds Regulations (published
in GN R 98 in GG 162 of 26
January 1962), and which comprises the following:
1.2
(a)
Name of the fund,
identification of the fund (e.g. registration number); period in
respect of which the contribution is payable;
(b)
Name and address of the
employer or pay-point which made the deduction; responsible person to
contact at the employer or pay-point;
(c)
Full name, date of
birth, ID number or employer pay number, or other means of
identification, date of membership, pensionable emoluments
of member
and percentage or amount of contributions, split between member and
employer as well as an indication of any additional
voluntary
contributions paid.
1.2
the “subsequent contribution statement” referred to in
regulation 33 (1)(a) of the Pension Funds Regulations (published
in
GN R 98 in GG 162 of 26 January 1962), and which comprises the
following:
(a)
the information
required in paragraph (a)(i) and (ii) and part of all the information
contained in paragraph (a) (iii) of regulation
33 (1)(a) of the
Pension Funds Regulations; or
(b) or
a reconciliation with the contribution statement for the previous
period showing any differences in the data such as additions
as a
result of new members, reductions as a result of membership
terminations, adjustments as a result of changes in pensionable

emoluments or the payment of additional voluntary contributions or
other information and corrections due to error.
2.
The first, second
and/or third respondent, the one paying the other to be absolved, are
directed to pay to the applicant all arrear
pension contributions
pertaining to the employees listed in annexure “SAM 3”
which have been withheld from it since
September 2013 to date;
3.
the first respondent is
directed to pay to the applicant interest on the total amount of the
pension contributions referred to in
paragraph 2 at the rate
prescribed in section 13 A(7) of the
Pensions Fund Act, No 24 of
1956
, calculated from 1 September 2013 to date of payment;
4.
The first to the third
respondents, the one paying the other to be absolved, are directed to
pay the costs of the main application;
5.
The second and third
respondents are directed to pay the applicant’s costs of the
failed counter-application, the collateral
challenge raised as a
defence in the main application, and the reserved costs of the
intervention application;
6.
The costs aforesaid
shall be on the scale of party and party and shall include the costs
of second counsel where retained.
_________________
B   HARTLE
JUDGE OF THE HIGH
COURT
DATE OF HEARING: 22
February 2018
DATE OF JUDGMENT: 14
August 2018
Appearances:
For
the applicant:  Mr. P Van Der Berg SC and Ms. D N Lundstrom
instructed by Shepstone Wylie c/o Smith Tabata Attorneys, Mthatha

(ref. Ms K Swarts/63S91300/rn).
For the first to third respondents:
Mr. A R Bhana SC and Ms. I Goodman instructed by Webber Wentzel
Attorneys c/o Keightly Sigadla
Nonkonyana Inc., Mthatha (ref. Mr
Sigadla/lm/SW0027).
[1]
Evidently
the applicant’s list of employees concerning whom the relief is
sought (per Annexure “SAM 3” to its
founding affidavit)
does not accord with the first respondent’s list (Annexure
“SM4” to the municipality’s
answering affidavit)
who it says became members of the MEPF. The lists are difficult to
reconcile in respect of number, name and
other details.
[2]
Presently a
reference to the Registrar or Financial Services Board must be read
as a reference to the “Authority”
contemplated in the
Financial Sector Regulation Act, No 9 of 2017, but nothing turns on
this development for present purposes.
[3]
Published under GN 98 in GG 162 of 26 January 1962 as amended (the
Regulations).
[4]
This is the purported “effective date” by when the
second respondent claims the employees became its members, to
the
exclusion of the applicant.
[5]
There is no indication that the last set of papers pertaining to the
collateral challenge were even served on the employees.
[6]
Their
absence at the hearing prompted the applicant to seek default
judgment against them in the main application, much to the
chagrin
of the second and third respondents given the augmented collateral
review as a further defence in the main application
which they
maintained was certainly still alive and required to be dealt with
whether the municipality made an appearance at
the hearing or not.
[7]
The
municipality concedes that it did nothing about the demand, simply
assuming that the applicant knew the demand to be without
any
foundation because of its request to recognize the employees’
resignation and to effect the transfer of their respective
monies
(member’s shares) to the MEFP.
[8]
The second and third respondents wholeheartedly associated
themselves with the first and second respondent’s opposition

in every respect once they came on board as intervening parties.
[9]
It is on the basis of this provision that the applicant was able to
persuade this court that even if a cessation of membership
by the
employees was notionally possible, which they argued against, the
municipality could not escape its obligations to pay
the
contributions they were obliged to in respect of the relevant
employees pending any amendment to its rules having the effect
that
the employees and the MEPF desire entailing a discontinuation of any
further contributions.  (See the provisions of
section 12 of
the PFA regarding the stringent processes to be applied in respect
of amendments to the rules of a fund.)
[10]
See section 13 A(5) of the PFA which in my view applies to a
permitted cessation of membership.  Different processes apply

in respect of sections 14, 28 or 29 scenarios. Contrary to how the
second and third respondents saw it, section 13A (5) of the
PFA does
not provide a basis for transfer of membership but merely dictates
how contributions are accounted for between the funds
when a member
resigns his membership if the rules of the first fund permit it.
[11]
See Rule 33 (8) regarding the time period within which the
statements must be provided.
[12]
See section 13 A(6) – (10) of the PFA.
[13]
See Regulation 33 (3) – (6).
[14]
William Van Der Riet Family Trust t/a Cathedral Peak Hotel v
Hospitality Industry Pension Provident Fund 2009 (4) SA 357 (SCA).
[15]
Section 37(1) of the PFA refers to a fine of 10 not exceeding ten
million Rands, or a term of imprisonment for a period not exceeding

10 years.
[16]
Section 13 A(8) of the PFA.
[17]
Section 13 A(7) of the PFA.  See also Regulation 33 (7).
[18]
Government
Gazette 37351, dated 18 February 2014.
[19]
It is evident from the manner in which this prayer is framed that
the constitutional relief is only necessary should I uphold
the
applicant’s interpretation of what it says Rule 3.2.1 means,
namely that a member may not resign his membership of
it while he
remains in service of the municipality.
[20]
The applicant lamented in its replying affidavit that the
municipality had not sought its assistance in terms of the
provisions
of section 14 of the PFA with which it purportedly had to
comply if it wanted to effect a transfer of the funds of the
employees,
but the parties (at least the second and third
respondents) appeared to be
ad
idem
with the applicant
that the provisions of this section are not necessarily applicable
to the kind of individual transfers here
envisaged.  In my view
however section 14 dictates the process for transfers and would be
applicable if the Rules of the
Provident Fund indeed made allowance
for members to withdraw their membership whilst still in the service
of the municipality.
On either parties’ version a
transfer of benefits can never take place on a members’ mere
expression of a wish to
do so.  It can never be the case given
the strictures of the PFA.  Indeed, the inclusion of prayers 2
and 3 in the
counter-applications, albeit framed in the alternative,
in my view followed the realisation by the second and third
respondents
that some formal process is a necessity to effect a
transfer in any event.
[21]
This appears to be how the PFA has dealt with problematic rules said
to constitute an infringement of constitutional rights,
i.e. by
directing the fund to take the necessary steps to amend its rules,
which amendment is to be approved in due course by
the Registrar.
See Chemical Industries National Provident Fund v Sasol Ltd &
Others
[2014] JOL 32213
(GJ) at par [10].
[22]
Supra
at par [43]
[23]
Section 13 of the PFA.
[24]
[2015] JOL 33910 (SCA).
[25]
At par [16].
[26]
The
rules of the applicant incidentally provide for transfers from the
applicant as follows in sub-rule 11.11.1:
“
11.11.1
In the event that any portion of the business of the Fund is
transferred to or amalgamates with any other approved Fund,
business
or organization, the following provisions shall apply:
(a)
The
Board shall determine the amount to be transferred (hereinafter
referred to as the ‘Transfer Value’) in respect
of each
Member who is to be transferred from the Fund, which amount shall
consist of the Member’s Share.
(b)
The
Transfer Value in respect of each Member to be transferred to such
fund shall, with effect from the effective date of transfer,
be
transferred to such other Fund, business or organization, subject to
the approval of the Registrar and subject to the provisions
of
section 14 of the Act.
(c)
Once
the Transfer Value has been transferred to such Fund, business or
organization, the affected Members’ membership of
the Fund
shall cease and the fund shall thereafter have no further liability
to or in respect of such former Members.”
[27]
Chemical Industries National Pension Fund v Sasol Ltd & Others
supra
at pars [30] to [33].  See also Sasol & Others v Chemical
Industries National Pension Fund
supra
at par [13].
[28]
2012 (4) SA 593
(SCA) at par [18].
[29]
Footnotes from the excerpt have been omitted.
[30]
The union is defined as the SAMWU.
[31]
This provision assumes that once the election was made to stay with
the other fund rather than the applicant, the die was cast.
[32]
Rule 4.2.1.
[33]
This provision in itself confirms the interpretation contended for
by the applicant in Rule 3.2.1 that cessation of membership
is
synonymous with service termination.
[34]
[2017] JOL 39235 (KZP).
[35]
[2013] 2 BPLR 197 (PFA).
[36]
It transpires that reasons were never furnished for the decision to
set aside the determination.  Moreover, the merits were
not
determined.  See Mtyhopa (sic)  v SAMWU National Provident
Fund
2015 (11) BCLR 1393
(CC) at par 4 which explains the context.
The matter came before the Constitutional Court but on a different
issue.
[37]
This
appears from a remark of the PFA made in Andreas v SAMWUNPF
[2014]
JOL 32210
(PFA) at par 5.12.
[38]
1997 (8) BCLR 1066
(T).
[39]
[2017] JOL 36796 (SCA)
[40]
At par [34].  This case dealt with the right of KZN
municipalities to be affiliated with retirement funds other than
those
listed in the applicable provincial legislation. The judgment
was upheld on appeal to the Constitutional Court [Municipal
Employees
Pension Fund v Natal Joint Municipal Pension Fund
(Superannuation) and Others (CCT 260/16)
[2017] ZACC 43
(1 December
2017).