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[2016] ZAKZDHC 55
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Moor and Another v Tongaat Hulett Pension Fund and Others (2118/2014) [2016] ZAKZDHC 55 (22 December 2016)
IN THE HIGH COURT OF
SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, DURBAN
CASE NO: 2118/2014
In the matter between:
BRUCE
ST CLAIR
MOOR
First
Applicant
WILLEM
JAN
HAZEWINDUS
Second
Applicant
and
THE
TONGAAT-HULETT PENSION
FUND
First
Respondent
THE TONGAAT HULETT
DEFINED BENEFIT
PENSION
FUND
Second
Respondent
TONGAAT
HULETT
LIMITED
Third
Respondent
Coram:
Koen J
Heard:
21 October 2016
Delivered:
22 December 2016
ORDER
The
application is dismissed with costs, such costs to include the costs
of two counsel where employed.
JUDGMENT
KOEN
J
INTRODUCTION
[1]
The Applicants, two former members of the Tongaat-Hulett Defined
Benefit Pension Fund
[1]
(‘the
Second Respondent’), seek the following relief:
[2]
‘
1.
Condoning the Applicants’ failure to institute this application
within the period stipulated in terms of section 30P(1)
[3]
of the
Pension Funds Act 24 of 1956
;
[4]
2. Setting aside the
determination of the pension Funds Adjudicator under reference number
PFA/GP/00003054/2013/TKM, issued on 19
December 2013;
3. Setting aside the
decision of the board of trustees of the second respondent (“the
board”) to allocate excess assets
(“the surplus”)
in the second respondent as at 30 June 2012, alternatively as at 1
April 2013, to the employer surplus
account in the sum of R363,2
million, alternatively in such amount as was in fact allowed to the
employer surplus account, in terms
of the second respondent’s
rule 11.5.4.1(b);
4. Directing the Board of
the Second Respondent to determine the actuarial surplus as at 30
June 2012 and to apportion the surplus
in accordance with the terms
of
section 15C(2)
of the PFA;
5 Directing the Board of
the Second Respondent, in giving effect to the order in prayer 4
above, to take into account:
5.1 the interests of all
the stakeholders as at 30 June 2012 in the manner contemplated by
section 15C(2)
of the PFA;
5.2 prior allocations of
actuarial surplus to the employer in 2007 and 2009, respectively;
5.3 any allocation of the
actuarial surplus in existence as at 30 June 2012 that may already
have been allocated to members of the
Second Respondent, if any, upon
their transfer out of the Second Respondent in 2012.
6. Ordering the second
respondent to pay the costs of this application; alternatively and in
the event of opposition from any other
respondent, that such
respondent and the second respondent are to pay the costs of this
application, jointly and severally.’
BACKGROUND:
[2]
The Second Respondent’s obligations to the Applicants and its
other pensioner members were outsourced
[5]
to Old Mutual with effect from 1 April 2013.
[6]
This was achieved pursuant to a conversion and re-structuring
exercise (hereinafter referred to as ‘the Scheme’) in
terms of section 14 of the Pension Funds Act 24 of 1956 (‘the
Act’) pursuant to a resolution passed on 14 May 2012.
The
Scheme was approved by the Registrar of Pension Funds (‘the
Registrar’) who on 15 August 2013 issued a certificate
of
approval.
[7]
The Scheme, which
entailed a transfer of assets and liabilities, was effected in
accordance with the terms of rule 11,
[8]
a registered rule of the Second Respondent specifically made
[9]
for that purpose.
[3]
Rule 11.5.4.1 provides that:
‘
The
enhancement to MEMBER, DEFERRED PENSIONER and PENSIONER transfer
values in RULE 11.5.1.2(a), RULE 11.5.2.3 and RULE 11.5.3.5,
shall be
calculated as follows:
(a)
The ACTUARY shall determine, as at the TRANSFER CALCULATION DATE, the
excess of the market value of the assets of the FUND over
the defined
benefit and defined contribution liabilities of the FUND and the
value of the
Employer Surplus Account.
(b) The value of the
excess assets determined in RULE 11.5.4.1(a) shall be notionally
split 80% to MEMBER, DEFERRED PENSIONER AND
PENSIONER enhancements
and 20% transferred to the
Employer Surplus Account
.’
(my
underlining).
[4]
The amount thus transferred to the Employer Surplus Account (‘ESA’)
amounted to R363,2 million
[10]
.
It shall hereinafter be referred to as ‘the 2012 apportionment’
or simply as ‘the apportionment’.
[5]
The 2012 apportionment to the ESA was preceded by three previous
apportionments
[11]
of
Actuarial surpluses by the Board of the First and Second Respondents
in 2001,
[12]
2007
[13]
and 2009.
[14]
[6]
Acting in terms of section 30A
[15]
of the Act, the Applicants challenged the decisions taken by the
boards of the First and Second Respondents regarding the distribution
of surpluses in the First and Second Respondents in 2007 and 2009
[16]
before the Pension Funds’ Adjudicator (‘the
Adjudicator’). The Adjudicator dismissed the Applicants’
complaint
on 19 December 2013
[17]
and concluded:
‘
In
the circumstances, this Tribunal is persuaded that, when allocating
the future surplus exclusively to the employer surplus account
the
interests of all the stakeholders were taken into account pursuant to
section 15C of the Act. Therefore, no grounds exist for
the board of
the first respondent’s decision to be set aside.’
[18]
[7]
Aggrieved by this determination of the Adjudicator, the Applicants on
21 February 2014 launched this application. The Applicants
are no
longer pursuing any relief in respect of the 2007 and 2009
apportionments,
[19]
but only
seek relief in respect of the 2012 apportionment, which they contend
the Adjudicator failed to deal with.
[20]
Nor do they attack the fact of a conversion introduced by the Scheme.
They simply seek to have the decision of the board of the
Second
Respondent allocating the amount allocated to the ESA in 2012 as part
of the conversion and outsourcing exercise,
[21]
set aside.
[22]
SECTION
30P OF THE ACT:
[8]
Section 30P(1) of the Act provides:
‘
Any
party who feels aggrieved by a determination of the Adjudicator may,
within six weeks after the date of the determination, apply
to the
division of the High Court which has jurisdiction, for relief, and
shall at the same time give written notice of his or
her intention so
to apply to the other parties to the complaint.’
[9]
It is an appeal in the wide sense. In
Meyer
v Iscor Pension Fund
[23]
the SCA held that questions regarding onus and disputes of fact in
section 30P proceedings should be approached in accordance with
the
guidelines formulated in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
,
[24]
that the complainant should be regarded as the 'applicant'
throughout, and that in the event of a 'genuine dispute of fact' on
the papers, the matter must be decided on the version presented by
the other side (in
casu
the
Second Respondent) unless its version can be described as so
far-fetched and clearly untenable that the court is justified in
rejecting it merely on the papers.
[10]
From the time the application was launched, the matter, like Topsy,
has just grown with a proliferation of affidavits, some
interlocutory
applications, and an amendment to the relief claimed in the Notice of
Motion. The Applicants have complained that
the multiple affidavits
resulted from the Second Respondent being ‘obfuscatory in
explaining its conduct’ and ‘drip-[feeding]
information
to the Applicants and to this Court’, whilst the Second
Respondent has complained that the Applicants have changed
the basis
of their claim as they realized that the answers proffered in
response to their contentions, left them without a remedy.
I do not
intend to enter into that debate and shall in this judgment simply
seek to decide the substance of the arguments raised
as I understand
them, to resolve the true issues between the parties.
THE
APPLICANTS’ CONTENTIONS:
[11]
The substance of the Applicants’ complaint is that the Second
Respondent failed to discharge its obligations to its members,
specifically the Applicants in the category of pension members,
before allocating the surplus to the ESA, and that the amount
apportioned in 2012 to the ESA was overstated. Initially this was
said to be in contravention of sections 14 and 15G of the Act
as well
as the rules of the Second Respondent. That was addressed in its
answering affidavit, concluding with a submission that
the case was
misconceived. Subsequently, the contention has remained that the 2012
apportionment to the ESA was overstated, but
now on the basis that
the Second Respondent’s actions contravened section 15C of the
Act. As that is the basis of the
claim persisted with, it will
be the argument I consider in this judgment.
[12]
The Applicants’ case is based simply on an interpretation of
rule 11.5.4.1(b) and various provisions of the Act, particularly
section 15C. They point out that rule 11.5.4.1(b) required the 20%
allocation of the excess assets to be transferred to the ESA.
However, as the rules of the Second Respondent apply ‘subject
to the provisions of this Act’,
[25]
regard must accordingly be had to the definition of ‘employer
surplus account’ in the Act.
[13]
They refer to section 1 of the Act which provides the following
definition of an ESA:
‘”
employer
surplus account”
,
in relation to a fund, means an account of the fund to which shall be
credited—
(a) amounts allocated by
the board of the fund in terms of sections 15B, 15C and 15F or
transferred into the fund for the credit
of the account in terms of
section 15E(1)(e);
(b) such contributions as
are specified in the rules to be credited to this account; and
(c)
fund return on the balance in the account from time to time: Provided
that the board may elect to smooth the return; …’
[26]
[14]
Accordingly they argue that any allocation of excess assets pursuant
to rule 11.5.4.1, is not an allocation in terms of section
15B, or
section 15F, or a transfer into the fund in terms of section
15E(1)(e), nor a contribution as specified in the rules to
be
credited to the ESA, nor a fund return on the balance in the account
from time to time.
[15]
Section 15C of the Act read as follows in 2012:
‘
15C
Apportionment of future surplus
(1)
The rules of a fund may determine any
apportionment of actuarial surplus arising in the fund after the
surplus apportionment date
between the member surplus account and the
employer surplus account.
(2)
If the rules of a fund are silent on the
apportionment of actuarial surplus arising after the surplus
apportionment date, any apportionment
shall be determined by the
board of the fund taking into account the interests of all the
stakeholders in the fund: Provided that,
notwithstanding anything to
the contrary in the rules of the fund, neither the employer nor the
members may veto such apportionment.’
[16]
Specifically with regard to section 15C, the Applicants contend,
briefly stated, that section 15C(1) requires that the rules
may
determine any apportionment of an actuarial surplus after the surplus
apportionment date. The contention however was that rule
11.5.4.1 (or
the whole of rule 11) could not be such a rule, as it sought to deal
with a transfer of excess assets, which is not
an ‘actuarial
surplus’ as contemplated in section 15C.
[17]
Further, since the board of the Second Respondent only implemented
rule 11.5, the Applicants maintain that the board by necessary
implication failed to act in terms of s 15C(2) of the Act.
[18]
They therefore contend that any apportionment of ‘excess
assets’
[27]
provided in
terms of rule 11.5.4.1, because it does not fall within any of the
component parts of the definition of ‘employer
surplus
account’, cannot be transferred into an ESA, and to the extent
that the rule requires that 20% (or for that matter
any other
percentage) of the excess assets be paid into the ESA, it would be
ultra
vires
the
provisions of the Act, or simply, in view of the provisions of
section 13 of the Act providing that the rules are to be read
subject
to the provisions of the Act, not permitted and unlawful. The
argument accordingly is that rule 11.5.4.1 could not lawfully
achieve
the transfer of 20% of the excess assets to the ESA and insofar as
the Second Respondent sought to do so with reliance
on that rule, it
acted unlawfully and the apportionment falls to be set aside.
ANALYSIS:
[19]
For an allocation to the ESA to be lawful, it needs to fall into one
of the categories contained in the definition of ‘employer
surplus account’. Plainly an apportionment of a future
actuarial surplus as provided for in section 15C will qualify. On
the
facts applicable in this application, the issue accordingly becomes
one whether the 20% allocation of the excess assets to
the ESA could
qualify as an apportionment of an actuarial surplus for the purpose
of section 15C.
[20]
Plainly, the words employed to describe what was to be allocated,
namely the ‘excess assets’ (as opposed to an
‘actuarial
surplus)
prima facie
suggests that it was something different
to an actuarial surplus that was being determined and apportioned;
‘excess assets’
and actuarial surplus not being
synonomous.
[21]
Clause 11.5.4.1(a) required that:
‘
The
ACTUARY shall determine, as at the TRANSFER CALCULATION DATE, the
excess of the market value of the assets of the FUND over
the defined
benefit and defined contribution liabilities of the FUND and the
value of the Employer Surplus Account.’
[22]
The relevant portion of the definition of ‘actuarial surplus’
in section 1 of the Act reads:
‘”
actuarial
surplus
”
,
in relation to a fund which is-
(a) Subject to actuarial
valuation, means the difference between-
(i) the value, calculated
in accordance with the prescribed basis, if any, that the valuator
has placed on the assets of the fund,
less any credit balances in the
member and employer surplus accounts; and
(ii)
the value that the valuator has placed on the liabilities of the fund
in respect of pensionable service accrued by members
prior to the
valuation date plus the amounts standing to the credit of those
contingency reserve accounts which are established
or which the board
deems prudent to establish on the advice of the valuator, calculated
in accordance with the prescribed basis,
if any
;’
[23]
The Applicants’ case relies upon a too narrow and, with respect
artificial interpretation of section 15C, which if followed
would
have consequences which could not have been intended by the
legislature. Section 15C must be interpreted having regard to
the
language used in the provision, the background thereto and the
legislative purpose that informed it.
[28]
[24]
As regards the background and legislative purpose of section 15C, the
Memorandum on the Objects of the Pension Funds Second
Amendment Bill,
which accompanied the Pension Funds Second Amendment Bill which was
adopted by Parliament read:
‘
The
use of the minimum benefit approach thereafter will ensure that
members get a fair deal. Section 15C therefore enables any surplus
that arises after the surplus apportionment to be dealt with by the
rules or by the trustees in the carrying out of their fiduciary
duties.’
[25]
In
ICS
Pension Fund v Sithole and others NNO
[29]
Rabie J remarked:
‘
[15]
Surplus arising in the books of a fund subsequent to the surplus
legislation and subsequent to the scheme implemented in terms
of s
15B may, according to s 15C, be apportioned
in
terms of the rules of the particular fund
.’
(My underlining).
[26]
Directive PF 3,
[30]
issued in
terms of section 33A of the Act in 2009 also provides
[31]
as follows regarding future surplus:
‘
DISTRIBUTION
OF AMOUNTS RELEASED FROM CONTINGENCY RESERVE ACCOUNTS AFTER SAD OR
EFFECTIVE DATE OF NIL RETURN
46. Where the board
determines, following approval by the Registrar of a surplus
apportionment scheme or after the noting of a nil
return, that an
amount set up as at SAD or the effective date
can be released from
a contingency reserve account, such amount released creates future
surplus
and
this surplus may be apportioned in terms of
section 15C of the Act
.
47. Section 15C
determines how “future surplus” may be distributed
between the member surplus account and the employer
surplus accounts,
and will be dealt with in terms of the rules, or where the rules are
silent, by a decision of the board taking
into account the interests
of all stakeholders in the fund.’
(My
underlining)
[27]
Having regard to the wording of section 15C (specifically the use of
the plural form ‘rules’, as opposed to the
singular), its
purpose as set out in the Memorandum, and the interpretation of
section 15C adopted by the Courts and applied by
the Registrar in
approving rule 11.5.4.1, it seems clear that all the Act requires in
section 15C(1) in relation to any future
surplus is that the rules
may determine the apportionment. It does not specify what type of
rule. It also does not provide that
what amounts to an actuarial
surplus cannot be apportioned as part of an apportionment of excess
assets.
[28]
Rules are made by the board of a pension fund.
[32]
The Act leaves it to the board to formulate any rules regulating
future surplus, subject to the Registrar’s approval of the
proposed rules (as opposed to there being no such indirect
Registrar’s oversight where there are no rules dealing with an
actuarial surplus, and an apportionment is determined by the board,
free of any veto by the employer or members, as contemplated
in
section 15C(2)). The reason for this probably is, as the Memorandum
states, that once the minimum benefit regime was introduced
and past
surpluses had been dealt with under section 15B, pension funds would
thereafter start with a clean slate.
[33]
[29]
Since the definition of employer surplus account contemplates the
allocation to such an ESA, it would follow that any rule
that
provides for the allocation to that account, as Rule 5.1.4 does,
necessarily requires that amounts allocated to the ESA must
in fact
constitute part of actuarial surplus as defined.
[30]
The interpretation of section 15C(1) contended for by the Applicants
is at odds with the language, background and purpose of
the section
and also at odds with the Registrar’s interpretation of section
15C. Section 15C does not:
(a) require that there
must be a single rule dealing with future actuarial surpluses; there
could be a number of rules;
(b) require that a rule
must deal exclusively
or
only with
future actuarial surpluses;
(c) prescribe what the
rule dealing with future actuarial surpluses must provide how it
should be structured;
(d)
require that the rules must provide for the allocation to both the
member surplus account and the ESA;
[34]
(e) require that
stakeholders be consulted in the formulation of the rules, or when
the trustees are acting in terms of section
15C(1) and (2).
(f) require that it must
expressly refer to actuarial surplus. What matters is that monies
that are apportioned do in fact qualify
as actuarial surplus;
(g) require that it must
expressly say that the amount to be allocated to the member surplus
account and the employer surplus account
must constitute actuarial
surplus (It follows from the definition of employer surplus account
that only actuarial surplus and amounts
referred to in that
definition can be allocated to that account);
(h)
require that it must deal exclusively with actuarial surplus to the
exclusion of other assets, such as contingency reserve accounts
and
other reserve accounts. In the context of winding up a fund, there
could legitimately be a single, all-encompassing rule that
deals with
all the assets of the fund. That rule could provide, for example,
that all assets not required to fund liabilities will
be split
between the member surplus account and the employer surplus
account.
[35]
Section
15C(1) is permissive, not prescriptive, and leaves it to the board of
trustees to determine how the rules are to be worded
and structured
to deal with any future actuarial surplus.
[31]
The Registrar registered rule 11.5.4 knowing that it deals with the
distribution of the assets of the Second Respondent in
excess of its
defined benefit and defined contribution liabilities. He would have
known that this includes actuarial surplus as
defined. The Registrar
was satisfied that the rule complied with the provisions of the Act
and duly registered it. He also approved
the distribution of excess
assets effected in terms of the rule and confirmed that in his
opinion the distribution was reasonable
and equitable.
[32]
The ‘excess assets’ determined in implementing the scheme
amounted to some R1 816 million. This amount comprised
reserves and
surplus. The excess was distributed during 2012 in accordance with
the provisions of the rule amendment
[36]
between the two distinct classes: the former and current members and
pensioners (‘the member group’) on the one hand,
and the
employer through payment to the ESA, on the other hand.
[33]
The Scheme was adopted following an extensive communication exercise
and was approved by all the in-service members and the
overwhelming
majority of the pensioners. The communication preceding this was
thorough. No basis has been advanced that the communications
relating
to the implementation of the Scheme were unclear or misleading.
[34]
Directive 3, which says that moneys released from contingency reserve
accounts must be dealt with in terms of section 15C,
also puts paid
to the Applicants’ contention that a rule contemplated in
section 15C cannot deal with surplus and reserves
but must only deal
with surplus.
[35]
The question more correctly then becomes one of whether the
percentage that was allocated pursuant to the ‘rules’,
specifically rule 11.4.5.1,
[37]
although being a percentage of what is labelled ‘excess
assets’, constitutes part of an ‘actuarial surplus’
(as defined and contemplated by section 15C).
[38]
[36]
The facts, as contained in the supplementary answering affidavit
filed by the Second Respondent show that the R363.2 million
allocated
to the ESA comprised 20% of the excess assets calculated in
accordance with the rules of the Fund. This did not however
mean that
the amount credited to the ESA did not also qualify as ‘actuarial
surplus’ as defined. The Second Respondent’s
actuary
confirmed that the R363,2 million indeed was part of an actuarial
surplus which he determined as part of the exercise he
carried out
under the rule. Based on interim valuations he had undertaken it was
determined that the total actuarial surplus available
amounted to
around R500 million. This is in excess of the amount allocated to the
ESA. It therefore complied with the provisions
of the Act as a lawful
allocation.
[37]
In this regard the Applicants have however complained that it had
been misrepresented to the Registrar of Pension Funds that
interim
valuations had been carried out when, it was alleged, that in fact no
such valuations had been made. In his affidavit Mr
Howard Buck, the
actuary and valuator of the Second Respondent explained that interim
valuations were performed. He disputed that
the Second Respondent
misrepresented this fact to the Registrar. He confirmed that an
actuarial determination of the surplus was
made. The minutes of the
meeting of the board of 28 September 2012 record that:
‘
the
updated position of the valuation of the Fund at 30 June 2012 that
had been circulated to the trustees by round robin had been
ratified’.
The
suggestion by the Applicants that because the updated financial
position of the Second Respondent was presented to the trustees
after
14 May 2012 (the date when rule amendment 3 (Rule 15.4.1) was
adopted), the trustees would not have known the financial position
of
the Second Respondent when they approved the rule, overlooks the fact
that what was provided to the trustees was an updated
position. The
earlier position was provided to the trustees at the meeting of 5
August 2011 when the proposal was adopted.
[38]
Nothing emerging from the further affidavits filed by the
Applicants,
[39]
including that
of the consulting actuary, Mr Andrew, alters my aforesaid
conclusions. In any event to the extent that there may
be any genuine
material dispute of fact, the version of the Second Respondent must
be preferred over that of the Applicants. The
version advanced by the
Second Respondent certainly cannot be described as so untenable that
this Court would be justified in rejecting
it merely on the papers.
Specifically in regard to the actuaries, the version given by Mr Buck
ought to be preferred,
[40]
not
that it would really be of much consequence, as there are no material
disputes between the factual views expressed by the actuaries,
and Mr
Andrew in broad terms confirmed Mr Buck’s calculation of the
actuarial surplus, which was adequate to allow the apportionment.
SECTION
15C(2) OF THE ACT:
[39]
But even if I was wrong in concluding that the allocation of the
R362,2 million was of an actuarial surplus in accordance with
a rule
of the Second Respondent as contemplated in section 15C(1), the
application nevertheless must still fail. If there was no
valid rule
as contemplated by section 15C(1) then the position would then be one
as contemplated by section 15C(2), that is where
the ‘rules are
silent on the apportionment of actuarial surplus’.
[40]
I do not agree with the contention that reliance on section 15C(2) is
not permitted in the alternative to section 15C(1). The
two
subsections are mutually exclusive, but if as a matter of law there
is no rule as contemplated in section 15C(1), then the
position might
be regulated in terms of section 15C(2), if the requirements of that
section are satisfied. The two subsections
of section15C clearly aim
to cater for different situations, the one where there are rules, and
the other where there are no rules,
which clearly presupposes valid
rules, dealing with the apportionment of an actuarial surplus. If a
particular new ‘rule’
on which reliance is sought to be
placed, was made to give effect to a determination by the board (as
it happened in this case
after consultation with the stakeholders,
for the implementation of a scheme which inevitably allocated a true
actuarial surplus),
then the same apportionment result was intended,
whether the rule was the
fons et origo
for the apportionment,
or simply an instrument to give effect to the determination of the
board. Absent the rule having validity,
the question still remains
whether the board of the Second Respondent in its decisions, achieved
a result which nevertheless satisfies
the requirements of section
15C(2).
[41]
Section 15C(2) has two requirements which the Second Respondent had
to comply with, namely the apportionment (in whatever form)
had to be
determined by the board, and the board had to take into account the
interests of all the stakeholders in the Fund when
making this
apportionment. A decision on apportionment was made, either in terms
of rule 11.5.4.1(b), or if it is invalid, then
pursuant to section
15C(2), to which effect was given in accordance with the terms of
rule.
[42]
The monies allocated to the ESA as a matter of fact fell within an
actuarial surplus. Accordingly, the first requirement was
met. As
regards the second requirement, the board had to consider the
interests of all stakeholders, being their hopes or expectations
to
share in the surplus.
[43]
A comprehensive report, dated 30 June 2011, setting out the history
of the Second Respondent and its surplus position was presented
to
the trustees so that they knew what the surplus was, what
enhancements were proposed to members’ benefits, and what was
proposed should be done about the surplus after provision had been
made for the enhancements of member’s benefits.
[41]
[44]
A reference to this initial proposal for conversion thereafter
appeared in the minutes of the meeting of the board of trustees
of
the Second Respondent of 5 August 2011. It reflected the estimated
amount of residual surplus that would be left after granting
enhancements to members, and concluded:
‘
After
a detailed discussion, including the need to balance the interests of
all the stakeholders of the Fund, the above recommendations
were
unanimously agreed.’
This
direct allegation that such interests were taken into account could
not be disputed. The trustees thereafter approved the appointment
of
a working group to deal with the implementation of the conversion and
outsourcing exercise. The decision however remained that
of the
board. It is the board which took the decision on the apportionment,
not this working group. The working group was simply
authorised to
develop any further recommendations for approval by the board. This
was reiterated in the minutes of 14 May 2012.
The proposal for the
outsourcing and allocation of residual surplus to the ESA was
discussed and unanimously agreed to by the board,
which included five
members elected as trustees. The board did not delegate its
decision-making powers. It delegated tasks to a
sub-committee and
accepted the recommendations of that sub-committee.
[45]
The details of the Scheme were communicated to members and pensioners
by the Second Respondent in the latter part of 2012 by
distributing a
series of communications to the different member groups explaining
details of how the conversion process was to
be implemented, and how
its surplus and reserves, integral to the calculation of the excess
assets, were to be divided. Specifically,
in letters dated 25 July
2012, 14 September 2012 and 18 December 2012, the Second Respondent
explained the basis upon which the
distribution would be done.
Interested parties were afforded an opportunity to comment on the
proposals contained in these letters.
The distinction between excess
assets and actuarial surplus was apparent. The Applicants were
informed that the allocation to the
ESA was 20% of the excess assets,
comprising surplus and reserves. Every single in service member and
in excess of 95% of the pensioners,
and the Registrar, thereafter
approved the Scheme.
[46]
It was also contended on behalf of the Applicants that there is no
indication that the trustees took into account that the
employer
received two previous allocations of future surplus to the exclusion
of the members. No evidence was advanced in support
of this
allegation and it is contradicted by direct allegations made by the
Second Respondent. But in any event, the Second Respondent
was only
established on 1 November 2010. There is no allegation in the
Applicants’ founding papers that from its inception
until 2012,
the Second Respondent had prior surplus allocations before the
surplus allocation in issue in this application. Indeed,
the report
presented to the trustees on 5 August 2011 showed that there was a
credit balance in the ESA which was taken into account
by the
trustees.
[47]
The contentions by the Applicants that the trustees of the Second
Respondent did not consider the interests of all stakeholders,
that
the actuarial exercise to determine the surplus position was not
performed, and that the trustees did not know what the surplus
position was, therefore remain speculative, are not borne out by the
facts, and are contrary to express allegations made by the
Second
Respondent which the Applicants could not deny.
[48]
The facts are consistent at the level of probability with the
trustees having decided to allocate a surplus to the member surplus
account and they did so having considered the interests of all the
stakeholders in the Second Respondent.
[49]
The contention by the Applicants that there was no compliance with
section 15C(2) because the trustees were simply giving effect
to rule
11.5.4 is therefore without merit.
[50]
Unlike section 15B, section 15C does not prescribe that future
actuarial surpluses must be distributed, does not prescribe
how a
future surplus must be distributed, does not prescribe the contents
of any rules in terms of which any future surplus is
to be
distributed, does not require that future surplus be allocated to
both the member surplus account and employer surplus account,
does
not require that future surplus should be dealt with separately from
(for instance) the allocation of other excess assets
of a fund, does
not require that a formal actuarial valuation report similar that
required under section 15B and 16 be prepared
before a future surplus
can be distributed, does not provide that the distribution of
future surplus is only lawful if it is done in a
certain way, and finally, does not prescribe that a rule contemplated
in section
15C(1) must deal exclusively with the distribution of
actuarial surplus.
THE
SCHEME WAS A COMPOSITE ONE:
[51]
However, if wrong in my above conclusions, the grant of the relief
claimed presents a further fundamental problem which the
Second
Respondent had raised
in limine,
and which I consider to be an
insurmountable obstacle to the Applicants.
[52]
The Scheme, in terms of which members and pensioners transferred
their interests
,
was
part of a composite offer made to all stakeholders which is not
capable of acceptance in part and being repudiated as to the
rest.
Granting the relief sought would involve an unscrambling of the
‘proverbial egg’. Had the scheme been proposed
with the
terms now contended for by the Applicants, it may very well not have
been accepted by the Third Respondent employer. Accordingly,
the
Second Respondent argued that it was not open to the Applicants to
upset that part of the conversion exercise which does not
suit
them
[42]
and leave the rest
intact.
[43]
[53]
Rule 11.4.5.1 resulting in an allocation to the ESA is part of a much
larger restructuring and conversion exercise having various
components enduring for the benefit of different parties. One was the
allocation of monies to the ESA. But it was inextricably
linked also
to all of the other components, depended also on them, and was not an
independent, discrete and self-contained rule,
separate from the
conversion and outsourcing exercise. The position, although clearly
not identical, is not dissimilar to the position
that presented in
Tellumat
[44]
to overturn a decision of the Financial Services Appeal Board, where
the following was said:
‘
[43]
With the utmost respect to the Appeal Board in the present case it
seems to me that it failed to give sufficient consideration
to the
fact that the s 14 application was part of a broader scheme of
distribution agreed upon by the trustees in 2007 when they
were
dealing with the apportionment of the surplus. Instead it dealt with
the two issues of the guaranteed 3% annual pension increase
and the
impact of the possible dissolution of the fund as if they were
discrete issues divorced from the entire distribution scheme.
Nowhere in the Appeal Board’s decision is there any
consideration of the fact that the transfer under consideration was
part of a larger arrangement having its origins in the decision of
the trustees in regard to the apportionment of the surplus.
Nor
is there any consideration of the fact that the impact of its
decision would necessarily be that the entire apportionment exercise,
held by the arbitrator to have been valid and lawful in proceedings
by Mr Roy against the Fund, would be thrown into disarray and
have to
be revisited.’
[54]
The
ratio decidendi
extracted from
Tellumat
is that the
apportionment of a surplus to an employer must be considered in the
context of the fund’s restructuring and outsourcing
exercise as
a whole, and not separately and in isolation. To do otherwise, would
run counter to the way in which restructuring
exercises are routinely
done.
[55]
Where the Applicants (and other members of the Second Respondent)
have accepted the other benefits bestowed upon them by the
Scheme,
their separate and discreet attack on only one component of the
composite Scheme must for the above reasons also fail.
[45]
THE
ALLEGED BIAS OF THE BOARD:
[56]
Finally, the Applicants submitted, but not with much vigour, that to
the extent that effect would be given to any decision
of the board in
the formulation and approval of rule 11, assuming it to be a rule for
the purpose of section 15C(1), or deciding
on an apportionment in
terms of section 15C(2), that such decision is unlawful because of
the composition of the Second Respondent’s
board when it
decided to allocate the portion of excess assets to the employer
surplus account. The allegation advanced is that
the board was
weighted in favour of the employer because the majority of its
members are beholden to the employer, that this gave
rise to a
conflict of interests, and that it leads to the reasonable
apprehension that the board was biased in favour of the employer,
and
hence that its decision to allocate 20% of the excess assets to the
employer surplus account should be set aside on this basis.
[57]
It is the board of the Second Respondent which may amend the rules or
make a decision in terms of section 15C of the Act. A
‘board’
is defined in section 1 of the Act as ‘the board of a fund
contemplated in section 7A of this Act’.
In 2012 section 7A of
the Act read as follows:
‘
7A
Board of fund
(1) Notwithstanding the
rules of a fund, every fund shall have a board consisting of at least
four board members, at least 50% of
whom the members of the fund
shall have the right to elect.
(2) Subject to subsection
(1), the constitution of a board, the election procedure of the
members mentioned in that subsection,
the appointment and terms of
office of the members, the procedures at meetings, the voting rights
of members, the quorum for a
meeting, the breaking of deadlocks and
the powers of the board shall be set out in the rules of the fund:
Provided that if a board
consists of four members or less, all the
members shall constitute a quorum at a meeting.’
[58]
Rule 5 of the rules of the Second Respondent deals with the
composition of its board. Rule 5.1 provides that the management
of
the Fund shall vest in ten (10) trustees, five (5) of whom will be
appointed in terms of Rule 5.2 and five (5) of whom will
be elected
in terms of Rule 5.3. Rule 5.2 provides that the principal employer
shall appoint five (5) employer trustees and an
alternate employer
trustee. Rule 5.3 provides that the members shall have the right to
elect five (5) member trustees and an alternate
from among their
number. Executives are not disqualified from being elected.
[59]
The structure of the Act, read with the rules therefore contemplates
that some of the members of the board will be appointed
by the
participating employer and some of them will be elected by the
members and be members themselves.
[60]
All the trustees are members of the Second Respondent, so there will
always be an inherent institutional conflict of interest
on the
board. This occurs in most boards of pension funds. The board
was however lawfully constituted in terms of the provisions
of the
Act. The Applicants, who were themselves trustees of the predecessor
to the Second Respondent, never, at any stage when
the board was
constituted or when it embarked on the communication exercise, sought
to attack the composition of the board.
[61]
The Registrar approved the Scheme and the rules which resulted in the
transfer of 20% of the excess assets to the ESA. The
Registrar also
never raised any issue with the composition of the board and never
raised a possible contravention of the PF Circulars,
which are issued
by the Registrar, with the Second Respondent.
[62]
I am also not persuaded that there has been any contravention of PF
Circular 130 as alleged by the Applicants.
[63]
I was not referred to any authority
[46]
in support of the proposition that a board which is lawfully
constituted and performs its functions in terms of the Act can have
its decisions set aside on the basis that some of its members may
have been conflicted because they were executives employed by
the
participating employer in a pension fund.
[64]
An apportionment of an actuarial surplus can only be for the benefit
of either the members or the employer. Potential or actual
conflicts
of interest are
therefore
inevitable. This is an
‘
institutional
bias
’
which is universal in
pension funds, and probably inevitable. Its mere presence is not
per
se
a ground for setting aside the
decision of the board.
[65]
What must
be shown
is
that the board acted improperly. That is what the
Applicants failed
to prove. It is no doubt
so that the Third Respondent might stand to gain significantly from
the apportionment made, but that by
itself, is not proof of an
unlawful bias and determination. In terms of the applicable legal
framework surplus may be allocated
to the ESA, to the member surplus
account, or to both.
COSTS
[66]
The Second Respondent has been successful in its opposition to the
application. In the ordinary course the costs should follow
the
result. Both sides employed two counsel. It was not contended that
the employment of two counsel was not justified. The matter
is an
important one to the parties and of sufficient complexity to justify
the employment of two counsel.
[67]
The factual position and the Second Respondent’s approach, were
explained in the Second Respondent’s response to
the
Applicants’ complaint submitted to the Adjudicator. In that
response it was explained that the ‘allocation of surplus
and
reserves’ was made ‘in accordance with rule amendment 3
to the rules’ which was ‘specifically formulated
and
submitted to the Registrar’, to regulate the ‘split of
excess surplus and reserves as to 80% for the benefit of
members and
pensioners and 20% to the employer surplus account’. The
Applicants were aware of those contentions when
the application was
launched.
[68]
Mr Watt Pringle SC, on behalf of the Applicants, with reliance on the
so-called
Biowatch
principle,
[47]
however
argued that the Applicants should not be mulcted in costs because the
application raised a matter of interest in the general
interest of
members of the Second Respondent generally.
[69]
Mr Franklin SC, on behalf of the Second Respondent countered that the
Biowatch
principle did not find application and that the
Applicants could not avoid an adverse costs order as
inter alia
:
(a) No principle arising
from the Constitution was involved;
(b) This was not a case
where the Applicants were faced with inaction by an organ of state
and were compelled to litigate to vindicate
their rights;
(c) As much as the
judgment would provide greater clarity on the legal positions of the
general body of members of the Second Respondent
generally, the
Applicants were pursuing the matter also in their own particular
interest.
[70]
The Constitutional Court has also since the matter was argued before
me held in regard to the
Biowatch
principle
that ‘a worthy cause cannot immunise a litigant from a
judicially considered, discretionarily imposed adverse costs
order’.
[48]
[71]
In the exercise of my discretion on costs I am not persuaded that the
costs of the application should not follow the result.
ORDER:
[72]
In the circumstances, I make the following order:
‘
The
application is dismissed with costs, such costs to include the costs
of two counsel where employed.’
___________________________
Appearances
Counsel
for Applicant: CE Watt-Pringle SC with K S McClean
Applicant’s
Attorneys: Fasken Martineau
c/o
MacGregor Erasmus Attorneys
Ref:
Bhauna Hansjee
Tel:
031 201 8955
Counsel
for Second Respondent: A E Franklin SC with S Khumalo
Second
Respondent’s Attorneys: Shepstone & Wylie
Ref:
TONG20656.3/3CFJ
Tel:
031 575 7001
[1]
The
Applicants were members and former trustees of the Tongaat-Hulett
Pension Fund (the First Respondent) which catered for employees
of
the Tongaat-Hulett group. In July 2007 the group split into two
separate public companies, namely Tongaat-Hulett Ltd (the
Third
Respondent) and Hulamin Ltd. New Pension Funds were created for each
and the assets of the First Respondent were divided
pro rata
according to the total members’ liability in each fund. The
employees of the Third Respondent were transferred
to the Second
Respondent with the Third Respondent being the participating
employee.
[2]
This
relief is as set out in the Applicants’ amended Notice of
Motion.
[3]
Section
30P allows any party who is aggrieved by a determination of the
Adjudicator made in terms of section 30M of the Act to
apply to the
High Court with jurisdiction for relief. The proper construction of
section 30P has been dealt with several times
by the Supreme Court
of Appeal and other divisions of the High Court, and the principles
applicable to section 30P applications
are well established –
see
Meyer
v Iscor Pension Fund
2003
(2) SA 715
(SCA) para 8;
Cape
Town Municipality v South African Local Authorities Pension Fund and
another
2014
(2) SA 365
(SCA) para 28.
[4]
Condonation
was granted by Lopes J on 1 April 2016.
[5]
The
effect thereof was that the Applicants’ membership of the
Second Respondent was terminated as a result.
[6]
From
2011 the Second Respondent was closed to new members. The in-service
members were transferred to a new defined contribution
fund and the
pensioner members outsourced to Old Mutual.
[7]
Thus
signifying that he was satisfied that the Old Mutual transfer was
reasonable and equitable and accorded full recognition
to the rights
and reasonable benefit expectations of the members of the Fund.
[8]
Rule
Amendment 3 introduced the terms of rule 11 in terms of which the
scheme was implemented. Rule Amendment 3 was submitted
to the
Registrar of Pension Funds on 13 June 2012 and approved on 13
December 2012.
[9]
Rules
of a registered pension fund are made in terms of section 12 of the
Act. Subject to the provisions of the Act the rules
are binding on
the Fund and the members, shareholders and officers thereof, and on
any person who claims under the rules or whose
claim is derived from
a person so claiming in terms of section 13 of the Act.
[10]
The
member group was allocated 80% of the excess assets.
[11]
The
Act commenced on 1 January 1958. It did not initially deal with
surpluses built up in retirement funds registered under the
Act. It
was noted inter alia in
Tek
Corporation Provident Fund and others v Lorentz
1999
(4) SA 884
(SCA), that disputes arise from time to time between
stakeholders in pension funds regarding the ownership, use and
distribution
of surpluses arising in pension funds, but it was found
that the broad policy issues which are raised by surplus disputes
are
best resolved by legislation. This gave rise to inter alia the
introduction of sections 14A to 15K contained in Chapter VA of the
Act, to deal with these issues - see
Chairman
of the Board of the Sanlam Pensioenfonds (Kantoorpersoneel) v
Registrar of Pension Funds
2007
(3) SA 41
(T). Sections 14A and 14B required that all pension funds
were prohibited from penalising members who left employment and
exited
the pension fund before their normal retirement date, pension
funds were required to pay exiting members at least what is known
as
a “minimum benefit”; and pension funds were required to
have a pension increase policy, whose aim had to ensure
that
pensioners who are in receipt of a monthly pension receive a minimum
pension increase at certain intervals. Section 15B
of the Act
required all pension funds that had actuarial surplus as at their
surplus apportionment date as defined in the Act
to distribute that
surplus by preparing a surplus apportionment scheme which complied
with the provisions of the Act and to submit
it to the Registrar for
approval. Section 15C provided for the apportionment of future
actuarial surpluses.
[12]
The
Applicants have raised no objection to the 2001 apportionment which
was on the basis of a three way split. Nothing more need
be said
about that apportionment in this judgment.
[13]
On 10
December 2008 an amount of R660 million, constituting what is
referred to as ‘the statutory actuarial surplus’
was
approved as a loan to be allocated to the employer’s surplus
account and pro-rated between the Third Respondent and
Hulamin Ltd.
No allocation was made to members and the remaining surplus remained
in the fund. In May 2009 the board of the First
Respondent converted
that loan into an unconditional allocation of surplus to the
employer’s surplus account.
[14]
At a
meeting of the First Respondent on 31 August 2010, an interim
actuarial valuation compiled in December 2009 was allocated
to the
employer’s surplus account in the sum of R132.2 million,
seemingly in terms of section 15C of the Act. No allocation
was made
to the members’ surplus.
[15]
Section
30A(3) of the Act allows a member who wishes to challenge decisions
taken by the board in terms of the rules of a pension
fund to lodge
a complaint with the Adjudicator, who may then make a determination
under section 30M.
[16]
At
the time the complaint was lodged, the 2012 outsourcing exercise was
still underway and had not been finalised.
[17]
Actual
complaint is at pages 126 to 158 of the record and was launched on
15 May 2013. Adjudicator’s determination appears
at pages 407
– 432 of the record.
[18]
This
followed after the Adjudicator had earlier determined that: ‘The
issue for determination is whether or not the board
of the first
respondent acted in accordance with its obligations in terms of
section 15C of the Act in allocating the actuarial
surplus in the
first respondent as at 31 December 2009 (the valuation date) to the
employer surplus account to the exclusion
of the member surplus
account on 31 August 2010.’
[19]
The
Applicants do however contend that the previous apportionments are
not irrelevant, as they entailed substantial amounts previously
having been allocated to the ESA for the benefit of the employer,
Tongaat-Hulett Limited, the Third Respondent.
[20]
The
Second Respondent dealt with the matter on that basis and did not
dispute this contention by the Applicants.
[21]
The
Applicants do not seek to set aside the Registrar’s approvals
of Rule 11 and the transfer under section 14.
[22]
The
Applicants are content with the conversion introduced by the Scheme
but dissatisfied with the allocations implemented.
[23]
2003
(2) SA 715 (SCA).
[24]
[1984] ZASCA 51
;
1984
(3) SA 623
(A) at 634E - 635D.
[25]
Section
13 of the Act.
[26]
A
member surplus account is defined as follows:
‘
member
surplus account’, in relation to a fund, means an account
provided for in the rules of the fund to which shall be-
(a) credited- (i) amounts
allocated by the board in terms of sections 15B and 15C to be used
for the benefit of members; (ii) fund return on the
balance in the account from time to time: Provided that
the board
may elect to smooth the fund return; and (iii) amounts
reallocated from the employer surplus account
to the account in
terms of section 15E; and …’
[27]
As
opposed to, for example, an actuarial surplus referred to in section
15C(1) of the Act.
[28]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA) para 18;
Dexgroup
(Pty) Ltd v Trustco Group International (Pty) Ltd
2013
(6) SA 520
at (SCA) para 16;
Bothma-Batho
Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk
2014
(2) SA 494
(SCA) paras 10–12.
[29]
2010
(3) SA 419 (T).
[30]
Unlike
PF Circulars, directives are issued in terms of the Act and are
legally binding. Section 33A reads as follows: ‘33A
Directives: (1) The registrar may, in order to ensure compliance
with or to prevent a contravention of this Act, issue a directive
to
a pension fund, an administrator or any other person in which
practices or actions that are required or prohibited are set
out.
(2) A directive issued in terms of in subsection (1) may- (a) apply
to pension funds generally; or (b) be limited
in its
application to a particular pension fund or kind of pension fund,
which may among other things be defined either in relation
to a type
or budgetary size of a pension fund. (3) A directive issued in terms
of subsection (1) takes effect on the date determined
by the
registrar in the directive.’
[31]
At
paragraphs 46 – 47 of the Directive.
[32]
Sections
12 and 13 of the Act. Section 12 of the Act empowers the trustees to
amend existing rules of a fund.
[33]
See,
British
American Tobacco Pension Fund v Howie NO and others
2016
(1) SA 398
(GP) para 7, where Potterill J said ‘The
legislature thus foresaw and enacted that within three years of the
commencement
of the surplus legislation on 7 December 2001 all
surpluses would be cleaned up and all funds would start with a clean
slate.
This was to be achieved with compliance with s 15B’.
[34]
The
authors of the
Commentary
on the
Pension Funds Act
,
Hunter
et
al
,
state at p. 434 that ‘there is nothing in this section that
suggests that, if the rules are to fall within the scope of
rules as
contemplated in subsec (1), they must provide for the allocation of
actuarial surplus to a fund’s member surplus
account and its
employer surplus account. The rules could, as some do, provide that
all future surplus will automatically be
allocated to the employer
surplus account. Such a rule would not be inappropriate if the fund
were a defined benefit balance
of cost fund. ’Contrast also
the present wording of section15C(1).
[35]
Per
Directive 3.
[36]
Rule
amendment no 3 which amended the provisions of
Rule 11.5
attached to
the FA as “FA2” at pages 60 to 71.
[37]
The
Second Respondent also highlighted that the allocation of excess
assets was performed in accordance with an approved rule,
which the
Applicants have not sought to challenge or have set aside, which
accordingly was decisive. In view of the introductory
words to
section 13 of the Act, the absence of any formal challenge to the
rule is not of significance.
[38]
In
their founding affidavit, the Applicants in fact equated the term
‘excess assets’ to ‘actuarial surplus’
as
defined, but asserted that the actuarial surplus or excess assets
comprised R363.2 million which ought to have been proportioned
80/20
in terms of rule 11.5.4.1(b). It was only when it was pointed out in
answer that the R363.2 million that was allocated
to the ESA did not
constitute actuarial surplus but was 20% of the total value of the
excess assets, that the argument was raised
in reply by the
Applicants that the allocation fell afoul of the provisions of the
definition of ‘employer surplus account’
and section15C
because it was not an ‘actuarial surplus’.
[39]
During
May 2015, just short of six months after receiving the Second
Respondent’s supplementary affidavit, the Applicants
filed a
series of further documents, namely a notice of motion seeking leave
to file a supplementary answering affidavit and
seeking an amendment
to the relief sought in the initial notice of motion, an affidavit
filed in support of the relief sought
in the notice of motion and in
reply to the Second Respondent’s supplementary answering
affidavit; and an extensive further
supplementary affidavit deposed
to by Mr Jeremy Andrew, a consulting actuary in his capacity as an
expert. In terms of the amended
notice of motion, the Applicants no
longer sought under prayer 4, an order declaring that the surplus in
the Fund amounted to
R363.2 million or such other amount allocated
to the ESA, or under prayer 5 an order directing the board to
allocate the amount
allocated to the ESA on an 80/20 basis as
between the members and the ESA, but now orders directing the board
to determine and
apportion the actuarial surplus in the Fund as at
30 June 2012 in accordance with section 15C(2) of the Act and in
making this
determination, a further order directing the Board, in
giving effect thereto, to take into account the interests of
stakeholders,
prior allocations of surplus and any allocation of
surplus in existence as at 30 June 2012 that may have already been
allocated
to the members.
[40]
Associated
Institutions Pension Fund v Van Zyl and others
2005
(2) SA 302
(SCA)
para
35, where the SCA said: “[35] I do not find it necessary to
get involved in this debate between the two actuaries.
First, to the
extent that it resulted in a dispute of fact, we must prefer the
version of De Wit (see
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984
(3) SA 623
(A) at 634G - 635D). Second, insofar as Lowther's
contentions in reply constitute a new case, we are precluded from
taking it
into account (see eg
Director
of Hospital Services v Mistry
1979
(1) SA 626
(A) at 635H - 636F).”
[41]
The
report commences at page 1035 of the record and ends at page 1064 of
the record.
[42]
It is
inter alia in that context that the application has been described
as self-serving; the Applicants are content to allow
the whole
restructuring and conversion exercise to continue but simply seek a
higher allocation of surplus for members and pensioners.
[43]
To
focus only on the ESA allocation ignores that the rights and
reasonable benefit expectations of members and pensioners of the
Fund were not only met, but exceeded, in the restructuring exercise.
Members received all of the reserves held by the Fund that
would
otherwise have been held as a safety buffer. Consideration also had
to be given to the rights of the employer as part of
the
restructuring scheme. It seems to have been appropriate for the
employer to participate in the surplus not only because of
the
nature of a defined benefit fund but also because the employer had
supported an aggressive investment strategy which was
integral to
the build-up of the future surplus, and further, the ratio of
contributions made by the employer / members
was approximately 2:1.
[44]
Tellumat
(Pty) Ltd v Appeal Board of the Financial Services Board and others
[2016]
1 BPLR 12 (SCA) (Also reported in [2016] 1 All SA 704 (SCA)).
[45]
In
Tellumat
(supra)
at paragraph 54 the SCA held as follows:
‘
It
could not be assumed by the Appeal Board that the enhancements to
pensions, both initially and when the annuities were taken
out,
would have been the same if the funding had to be taken from the
overall surplus. That would have diminished the employer
surplus account and the ultimate benefit the employer would receive
from that account. Would Tellumat have agreed to that?
It
seems unlikely in the extreme that it would. The trustees knew what
surplus had to be apportioned. They started negotiating
from
opposite poles. If it had been said that any pension
enhancements, beyond the original 8 percent increase, would have
to
be funded proportionally by both the member and the employer surplus
account, it is inconceivable that the trustees would
have arrived at
the same agreement in regard to the apportionment of the surplus.
The reason is the obvious one that it
would have involved a
significant increase in the benefit to be derived from the surplus
by members and a significant decrease
in the benefit flowing to
Tellumat from that source. In all likelihood the outcome of
the negotiations would have been
substantially different.’
Even if the decision of the board of the Fund is found wanting, this
Court retains a residual
discretion to refuse to set the decision
aside – see
Judicial
Service Commission and another v Cape Bar Council and another
2013
(1) SA 170
(SCA) at para 13. In
Seale
v Van Rooyen NO and others; Provincial Government, North West
Province v Van Rooyen and
others
2008 (4) SA 43
(SCA) 50 para 13.
Factors
relevant to the exercise of that discretion include amongst others
the lapse of time, the need for finality, the consequences
for the
public at large, and the extent to which persons may have acted in
reliance on the decision which it is sought to set
aside. If a part
of the scheme (the allocation) is set aside and dealt with on a
different basis, the rights of other stakeholders,
who have arranged
their affairs on the basis that the scheme was approved by all
stakeholders as is and approved by the Registrar
as such, will be
affected.
[46]
None
of the authorities relied upon by the Applicants in their heads of
argument support the case made by Applicants on the question
of
conflict of interests in a pension fund, but deal with a different
situation.
[47]
Biowatch
Trust v Registrar, Genetic Resources and others
2009
(6) SA 232 (CC).
[48]
Lawyers
for Human Rights v Minister in the Presidency and others
[2016]
ZACC 45.