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[2008] ZASCA 164
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Highveld Steel and Vanadium Corporation Ltd v Oosthuizen (103/2008) [2008] ZASCA 164; 2009 (4) SA 1 (SCA) ;[2009] 2 All SA 225 (SCA); (2009) 30 ILJ 1533 (SCA) (1 December 2008)
Links to summary
THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case No: 103/ 2008
HIGHVELD
STEEL AND VANADIUM Appellant
CORPORATION
LTD
and
H F M OOSTHUIZEN
Respondent
Neutral
Citation: Highveld Steel and Vanadium Corporation Ltd v
Oosthuizen (103/2008)
[2008] ZASCA 164
(01December
2008)
Coram:
Harms ADP, Scott, Brand, Maya JJA et Griesel AJA
Heard:
11 November 2008
Delivered:
01 December 2008
Summary:
Pension Funds Act 24 of 1956
– whether a
pension fund has discretion under
s 37D
to withhold payment of
pension benefits due to a member at the termination of his employment
pending finalisation of a claim for
damages allegedly suffered by the
member’s employer by reason of theft, dishonesty, fraud or
misconduct committed by the
member.
ORDER
_____________________________________________________________
On
appeal from:
Pretoria High Court (Hartzenberg
J)
The appeal is upheld with costs, such costs to include
the costs occasioned by employment of two counsel.
The order of the court below is set aside and for it is
substituted the following:
‘
(a) Highveld Steel and Vanadium Corporation Ltd
(Highveld) is granted leave to intervene in the application
launched by the respondent
under case number 24648/07.
(b) The application under case number 24648/07 is
postponed pending the final determination of the action instituted by
Highveld
in the Transvaal Provincial Division under case number
13776/07.
(c) The costs of the application, including those of the
application to intervene, are reserved.’
_____________________________________________________________
JUDGMENT
MAYA
JA: (Harms ADP, Scott, Brand, Maya JJA et Griesel AJA concurring):
[1] This is an appeal against the judgment of the
Pretoria High Court (Hartzenberg J) dismissing the appellant’s
application
to intervene in application proceedings launched by the
respondent, its erstwhile employee, against the appellant’s
Pension
Funds, Highveld Retirement Fund (Provident Section) and
Highveld Retirement Fund (Pension Section), (‘the Funds’),
for payment of his pension benefits in terms of the Funds’
rules. The appeal is with leave of the court below.
[2] The issue on appeal is whether or not the boards of
the Funds had the power to withhold payment of pension benefits due
to the
respondent pending the outcome of a damages action to be
instituted by the appellant against him.
[3] The background facts which gave rise to these
proceedings are briefly these. The respondent commenced employment
with the appellant
as an observer in its metallurgical division and
joined the Funds on 1 August 1978. He rose through the ranks over the
years and
by January 2006 he held the position of Unit Manager in
charge of stores with contents worth approximately R177m at any given
time.
On 31 January 2007, the appellant instituted disciplinary
proceedings against the respondent for bribery, fraud, theft and
other
transgressions involving dishonesty. The respondent pleaded
guilty to some of the charges. At the conclusion of the proceedings,
on 16 February 2007, he was dismissed.
[4] Shortly thereafter, the respondent sought to
withdraw his pension benefits from the Funds. On 28 February 2007, at
the behest
of the appellant, which intended to institute an action
against the respondent to recover losses it allegedly suffered as a
result
of his misconduct, the Funds resolved not to pay the benefits
due to the respondent pending the final determination of the
contemplated
action which was subsequently duly instituted.
[5] The respondent brought an application for an order
directing the Funds to pay him his pension benefits. The Funds
elected to
abide the court’s decision, despite initial
opposition to the application. The appellant then launched the
application to
intervene in the application and sought an interdict
restraining the respondent from withdrawing any of his pension
benefits and
other relief. However, on appeal before us, the relief
sought had been whittled down to leave to intervene and a
postponement of
the respondent’s application against the Funds
pending the final determination of its action against the respondent.
[6] In dismissing the application to intervene, the
court below invoked a judgment of this court in
Absa
Bank Ltd v Burmeister
1
for its finding that s 37D of the Pension Fund Act 24 of 1956 (the
Act), which regulates deductions from pension benefits, must
be
interpreted restrictively. On that basis, the court below held that
the right of an employer in the appellant’s position
is
restricted to what is specifically stated in s 37D. In its view, the
legislature would have said so expressly had it intended
to vest
courts with the implicit power to protect an employer by preserving
its right pending an action to ascertain whether or
not it is owed
money. The court concluded that a finding that such implicit power
existed would allow employers to ‘cause
tremendous hardship to
ex-employees’ by instituting and then delaying actions.
[7] The first question that arises is whether the order
refusing leave to intervene is appealable. The argument for the
respondent
in this regard was that the decision of the court below
was merely a procedural ruling similar to a refusal to entertain an
application
as one of urgency, with no final effect to the rights of
the intervening party. The basis of this submission was that the
appellant
had the option to apply for interim relief in its action
after the dismissal of the intervention application.
[8] As pointed out by Harms AJA in
Zweni
v Minister of Law and Order
,
2
a ‘judgment or order’ is a decision which, generally, is
final in effect and not susceptible of alteration by the court
of
first instance, is definitive of the rights of the parties and has
the effect of disposing of at least a substantial portion
of the
relief claimed in the main proceedings.
[9] The result of the order in the event of the
respondent’s success in the main application is that the
appellant would most
probably end up with a hollow judgment,
precluded from enforcing the future compensation award it may obtain
against the respondent
in the pending action. As I see it, the
refusal of the intervention application, which obviously cannot be
altered by the court
below, is the end of the road for the appellant
in so far as seeking the relief in issue is concerned. In my view,
the decision
of the court below is a ‘judgment or order’
as envisaged in
Zweni
.
It is therefore appealable.
[10] Turning to the merits of the appeal, it was
contended on behalf of the appellant that rule 12 of the Provident
Section Fund
read with s 37D(1)(b)(ii) of the Act implicitly confers
upon the trustees of the Funds power to withhold or delay payment of
benefits
due to a member pending determination or admission of
liability. It was conceded that the trustees of the Funds were not
entitled
to make any deduction in the absence of a written admission
of liability by the respondent or a judgment obtained by the
appellant
against him as required by s 37(1)(b)(ii). However, it was
argued that the object of that section – the protection of an
employer against loss occasioned by employees’ acts of
dishonesty – would be thwarted if an employee could simply
circumvent
it by resigning and claiming immediate payment of his
benefits upon discovery of his criminal conduct.
[11] For the respondent it was contended that s 37D
cannot be interpreted in isolation and must be read with s 37A(1)
which contains
provisions of general application prohibiting the
reduction, transfer or execution of pension benefits. As s 37D
provides an exception
to that general application, it must be
strictly interpreted, so the argument continued. It was submitted
further that these provisions
so interpreted and read with rules
8.3.3 and 7.3 of the Funds,
3
which similarly require the payment of pension benefits to be made
‘as soon as possible’ after a member’s termination
of service, did not confer the implied power contended for by the
appellant.
[12] Rule 12 of the Provident Section Fund, which is
identical to rule 11 of the Pension Section Fund, vests the trustees
with ‘the
right to make such deductions from the benefit to
which a member or other beneficiary is entitled in terms of the rules
as are
permitted in terms of s 37D of the [Pension Funds] Act and in
respect of which a claim has been lodged in writing within such
reasonable
time of the event giving rise to the benefit as the
trustees may from time to time fix for making such claims.’
[13] Section 37A(1) reads:
‘
Pension benefit is not reducible, transferable or
executable.
(1) Save to the extent permitted by this Act, the Income Tax Act,
1962 (Act 58 of 1962), and the
Maintenance Act, 1998
, no benefit
provided for in the rules of the registered fund (including an
annuity purchased or to be purchased by the said fund
from an insurer
for a member), or right to such benefit, or right in respect of
contributions made by or on behalf of a member,
shall,
notwithstanding anything to the contrary contained in the rules of
such a fund, be capable of being reduced, transferred
or otherwise
ceded, or of being pledged or hypothecated or be liable to be
attached or subjected to any form of execution under
a judgment or
order of a court of law …’.
Section 37A(3)
however states that the prohibition against reduction
does not apply to a reduction effected under
s 37D.
[14]
Section 37D(1)(b)
provides:
‘
(1
) A registered fund may –
(a) …
(b) deduct any amount due by a member to his employer on the
date of his retirement or on which he ceases to be a member
of the
fund, in respect of –
(i) …
(ii) compensation (including any legal costs recoverable from the
member in a matter contemplated in subparagraph (bb)) in respect
of
any damage caused to the employer by reason of any theft, dishonesty,
fraud or misconduct by the member, and in respect of which
–
(aa) the member has in writing admitted liability to the employer;
or
(bb) judgment has been obtained against the member in any court,
including a magistrate’s court,
from any benefit payable in respect of the member or a beneficiary in
terms of the rules of the fund, and pay such amount to the
employer
concerned’.
[15] It should be pointed out at the outset that the
respondent’s submissions relating to the provisions of
s 37A(1)
were ill-conceived for the simple reason that the appellant did not
seek any reduction of or deduction from his pension benefits.
All it
asked was an order affirming the Funds’ decision to withhold
payment of such benefits pending resolution of its claim
against the
respondent. As stated, the issue is merely whether or not the Funds
had the discretion to accede to that request.
[16] It has been stated in a number of cases that the
object of
s 37D(1)(b)
is to protect the employer’s right to
pursue the recovery of money misappropriated by its employees.
4
This approach is, in my view, supported by the plain wording of the
section and is, with respect, correct.
[17] However, a practical problem threatens the efficacy
of the remedy afforded by the section. In many a case employers only
suspect
dishonesty on the date of termination of an employee’s
service and fund membership with the consequence that pension
benefits
are paid before the suspected dishonesty can be properly
investigated. Furthermore, it has to be accepted as a matter of logic
that it is only in a few cases that an employer will have obtained a
judgment against its employee by the time the latter’s
employment is terminated because of the lengthy delays in finalizing
cases in the justice system. The result, therefore, is that
an
employer will find it difficult to enforce an award made in its
favour by the time judgment is obtained against him.
[18] These practicalities lead me to disagree with the
submissions for the respondent, inter alia, that the tense used by
the legislature
in
s 37D(b)(ii)(aa)
and (bb), in the words ‘
has
in writing
admitted
liability’ and ‘judgment
has
been obtained’
reflects an intention that either proof of liability must be
available on termination of the employment contract. I similarly have
a difficulty with the contention that the words ‘as soon as
possible’ in
rule 7.3
require payment of the pension benefits
to be effected immediately upon termination of an employee’s
service.
[19] Such an interpretation would render the protection
afforded to the employer by
s 37D(1)(b)
meaningless, a result which
plainly cannot have been intended by the legislature. It seems to me
that to give effect to the manifest
purpose of the section, its
wording must be interpreted purposively to include the power to
withhold payment of a member’s
pension benefits pending the
determination or acknowledgement of such member’s liability.
5
The Funds therefore had the discretion to withhold payment of the
respondent’s pension benefit in the circumstances. I daresay
that such discretion was properly exercised in view of the glaring
absence of any serious challenge to the appellant’s detailed
allegations of dishonesty against the respondent.
[20] Considering the potential prejudice to an employee
who may urgently need to access his pension benefits and who is in
due course
found innocent, it is necessary that pension funds
exercise their discretion with care and in the process balance the
competing
interests with due regard to the strength of the employer’s
claim. They may also impose conditions on employees to do justice
to
the case.
[21] In the result the following order is made:
The appeal is upheld with costs, such costs to include
the costs occasioned by employment of two counsel.
The order of the court below is set aside and for it is
substituted the following:
‘
(a) Highveld Steel and Vanadium Corporation Ltd
(Highveld) is granted leave to intervene in the application launched
by the respondent
under case number 24648/07.
(b) The application under case number 24648/07 is
postponed pending the final determination of the action instituted by
Highveld
in the Transvaal Provincial Division under case number
13776/07.
(c) The costs of the application, including those of the
application to intervene are reserved.’
__________________
MML MAYA
JUDGE OF APPEAL
APPEARANCES:
For Appellant: A E Franklin SC
M A Chahan
Instructed by
Brink Cohen Le Roux
Inc., Houghton
c/o
Claude Reid Inc., Bloemfontein
For Respondent: J G Bergenthuin SC
N F de Jager
Instructed by
Van Zyl Le Roux and
Hurter Inc., Pretoria
c/o McIntyre and Van
Der Post, Bloemfontein
1
2004 (5) SA 595
(SCA) at para 14.
2
1993 (1) SA 523
A at 532I-J.
3
The identical provisions read:
‘The benefit in terms of this
Rule shall be paid to the Member as a lump sum. Payment shall be
made as soon as possible
after the date of his leaving Service.’
4
See, for example,
Twigg
v Orion Money Purchase Pension Fund
(1)
[2001] 12 BPLR 2870 (PFA) at para 21,
Charlton
v
Tongaat-Hulett Pension Fund
[2006]
2 BPLR 94 (D) at 97I-98B.
5
Twigg
(supra) at
para 21;
Chalton
(supra)
at 98B;
Appanna v Kelvinator Group
Services of SA Provident Fund
[2000] 2
BPLR 126 (PFA);
Buthelezi v Municipal
Gratuity Fund
(1) [2001] 5 BPLR 1996
(PFA);
Allison v IMATU Retirement Fund
[2004] 7 BPLR 5831 (PFA).