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[2007] ZASCA 48
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Registrar of Pension Funds and Another v Angus NO and Others (677/05) [2007] ZASCA 48; [2007] 2 All SA 608 (SCA); 2007 (5) SA 1 (SCA); (2007) 28 ILJ 1695 (SCA) (30 March 2007)
Links to summary
IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
CASE NO 677/05
In the
matter between
REGISTRAR OF
PENSION FUNDS
......................
First Appellant
NATIONAL UNION OF METAL WORKERS OF
SA
......................
Second Appellant
and
BRIAN ANGUS NO
......................
First Respondent
CA BOYES
......................
Second Respondent
S VORSTER NO
......................
Third Respondent
P WITTSTOCK NO
......................
Fourth Respondent
O GOLDSTUCK NO
......................
Fifth Respondent
H FISCHER NO
......................
Sixth Respondent
L MATTEUCCI NO
......................
Seventh Respondent
DCG MURRAY NO
......................
Eighth Respondent
DA CARSON NO
......................
Ninth Respondent
E VORSTER NO
......................
Tenth Respondent
________________________________________________________________________
CORAM: HOWIE P, BRAND, HEHER, PONNAN JJA et MUSI AJA
________________________________________________________________________
Date Heard: 27 February 2007
Delivered: 30 March 2007
Summary: Pension Funds Act applies to neither a fund established
by an industrial council agreement nor to one established separately
from, but pursuant to, such an agreement.
Neutral citation:
This judgment may be referred to as
Registrar of Pension
Funds v Brian Angus NO
[2007] SCA 48 (RSA)
_________________________________________________________________
J U D G M E N T
________________________________________________________________________
HOWIE P
HOWIE
P
[1] I have had the advantage of reading the judgment of
my Colleague Heher. What follows is stated with respect to his
reasons and
conclusion. In my view the appeal should fail.
[2] The exemption in s 2(1) of the Pension Funds Act
(PFA) (in its original wording) pertained to a fund established ‘in
terms
of’ an agreement gazetted under s 48 of the Industrial
Reconciliation Act 36 of 1937 (the 1937 Act). It is accepted that
publication
under the similar s 48 of the Industrial Conciliation
(later, Labour Relations) Act 28 of 1956 (the 1956 LRA) sufficed to
also bring
the exemption into play. Indeed, it is the latter statute
which together with s2(1) of the PFA forms the focus of the present
case.
[3] The appeal, as I see it, turns on the interpretation
of ‘in terms of’. The expression constitutes, in effect,
a linking
preposition. It can have the narrow meaning of ‘by’,
in the sense that the fund owes its existence to the agreement,
or
the wide meaning of ‘pursuant to’ or ‘in accordance
with’. The Afrikaans equivalent used in the original
version of
s 2(1) was ‘ooreenkomstig’. Currently it is ‘ingevolge’.
That there is a great degree of synonymity
in these various
expressions (and other common alternatives), depending on context,
appears from the judgments in the Oosthuizen
and Slims cases.
1
The narrow meaning conveys an immediate or direct link
between the published agreement and the fund. The wide meaning
conveys a looser
or indirect connection.
[4] Much of the argument for the appellant, based on the
narrow meaning, centred on various differences that would exist
between a
fund created by the agreement itself and one created as
were the funds in this matter. The thrust of the argument was that a
fund
established in the manner of the EIPF and the MIPF required, for
example, the oversight and investigation provisions contained in
the
PFA. By contrast, a fund established by the agreement itself was such
that it would not fit within the framework of the PFA whether
appropriately or at all.
[5] The effect of the counter argument for the
respondents was that whatever the mode of establishment, it could not
detract from
the fact that in either instance the fund would be one
set up by a particular industry to serve and be amenable to the
requirements
and circumstances of that industry. Accordingly ‘in
terms of’ bore, according to the facts, either the wide meaning
of
‘pursuant to’ or ‘in accordance with’, or
the narrow meaning of ‘by’.
[6] Section 23 of the constitution now confers the right
of trade unions and employers’ organisations to engage in
collective
bargaining. The agreements involved in this case were the
product of precisely that process albeit decades before the
constitutional
era. I shall revert to the matter of collective
bargaining when discussing the question of legislative purpose and
context. First
there is the matter of legislative language.
[7] For an agreement to have been published under s 48
it had to have been an agreement referred to in s 24(1) and, in the
present
context, an agreement concerning the subject matter in
paragraph (r) of that subsection. If s 24(1)(r) referred exclusively
to an
agreement establishing a fund the conclusion would have been
unavoidable that the fund in such instance would have been one
established
by
the
published agreement. However, s24(1)(r) refers to an agreement which
‘may include provisions
as to
... the establishment of ... funds’ (my emphasis).
The wording is wide enough to cover not only an agreement
establishing a
fund but also an agreement in which provision for or
reference to establishment is made.
[8] Then, it is significant to note that s 24(1)(r) ends
with the words
‘
or towards similar funds established by or
in terms of the constitution of the council’.
Those words were not in s 24(1)(r) of the 1937 Act. They
serve clearly to convey that establishment ‘by’ is
different
from establishment ‘in terms of’. The same
prepositions also appear in s 24(3) of the 1956 LRA in the phrase
‘the
agreement or constitution by or in terms of which such
fund has been established’. Section 24(3) specifically concerns
a fund
referred to in s 24(1)(r) and it, too, had no counterpart in
the 1937 Act. Considering that the PFA and the 1956 LRA were passed
in the same year and must have been drafted at much the same time as
each other, one must conclude that the legislature, in using
‘established in terms of’ in s 2(1) of the PFA, was
conscious of its use of ‘by or in terms of’ in the 1956
LRA and deliberately used the expression of wider import in the PFA.
[9] It may therefore not be altogether surprising that
when the EIMF applied in 1964 for registration under the PFA
(because, so it
said, it had up to then understood that it was
excluded from the PFA’s provisions by the exemption in s 2(1))
its letter of
application stated:
‘
We also enclose two copies of the
Industrial Agreement in pursuance of which the Fund was established.’
[10] Coming now to the EIPF agreement and its content,
it was entered into by the parties to the council of the particular
industries
concerned. The declared purpose of the agreement was ‘in
accordance with the provisions of the [1956 LRA] to provide for the
payment of contributions to a Fund to be established and known as
“the Metal Industries Group Life and Provident Fund”.
(This was the EIPF’s original name.) It was therefore an
industrial council agreement aimed at the eventual creation of an
industry pension fund.
[11] The agreement stated in clause 4 who would be
members of the fund on its establishment, and clause 5 required
contributions to
be paid by employers to the council, which would
then pay the accumulated contributions to the fund when established.
Clause 6 required
that the fund be administered by a board of
management in accordance with rules and a constitution and that the
rules be consistent
with the agreement and the 1956 LRA. In addition
a copy of the rules and amendments were to be lodged with the
Secretary for Labour
(the then title of the administrative head of
the Department of Labour).
[12] It seems to me that all these provisions were, to
quote s 24(1)(r) of the 1956 LRA, provisions ‘as to the
establishment’
of the EIPF.
[13] It is not clear by virtue of what further decisions
of the council or by what procedures the constitution and rules of
the EIPF
were drafted. Nor does one know precisely how the
representatives of the parties to the fund came to assemble together
when the resolution
to adopt the constitution and rules was taken.
Accepting fully that it was such adoption that established the fund,
the question
remains whether establishment was ‘in terms of’
the agreement.
[14] Despite the absence of fuller information it seems
sufficiently clear that the hand of the council lay heavy on
everything that
was done from and including the conclusion of the
agreement until the fund was established and operating. The parties
to the fund
and the parties to the board of management were the same
as the parties to the council. It is also more than likely that the
constitution
and rules were procured and drawn by or at the instance
of the council. The establishment of the fund was therefore squarely
in accordance
with the council’s stated purpose that the fund
for which contributions would be collected would ‘be
established’.
[15] All that is reinforced by the content of the
constitution and rules. The first name of the fund accorded with the
name stated
in the agreement. As required by the agreement, a board
of management was set up to manage the fund in accordance with the
rules.
Membership eligibility under the constitution was basically in
accordance with what the agreement laid down. Contribution collection
was to be effected as required by the agreement and, indeed, the
rules’ provisions for collection not only echoed very closely
the provisions of the agreement on the same topic but referred
specifically to the agreement. As regards amendments, the
constitution
provided that amendments to it and the rules would be
notified to, inter alia, the Secretary for Labour, again following a
provision
of the agreement. Finally, winding up was to be by
unanimous decision of the organisations constituting the parties to
the council,
who were, as I have said, also the parties to the fund
and board of management.
[16] Counsel for the appellant sought to meet the impact
of all these features by stressing that in clause 5(4) of the
agreement it
was envisaged that the fund might not be established
after all and that in that event contributions collected in the
interim would
be refunded. I do not think that the subclause detracts
from the weight of the features to which I have referred. Seeing that
the
fund’s establishment was at the time of the agreement only
a contemplated future event it was no more than an obvious and
sensible
precaution to provide for refunds in the event of
non-establishment.
[17] Next, appellant’s counsel pointed to the
winding up provision in the constitution of the fund which laid down
that distribution
would occur in accordance with the rules unless
inconsistent with the PFA. I do not think that this reference to the
PFA supports
the argument that a fund’s establishment other
than ‘by’ an agreement appropriately qualifies the fund
to receive
the benefit of the provisions of the PFA. It may do so but
that is not the point. The PFA ‘formula’ is simply an
equitable
example to follow. If anything, the reference to the PFA
serves to show that the parties to the agreement intended the fund to
be
under the industrial council umbrella and recognised that the PFA
would not apply as a matter of lawful course.
[18] The essence of the appellant’s argument was,
as I have indicated, that a fund established in the manner of the
EIMF and
the MIPF is open to a number of material advantages which a
fund established ‘by’ a s 24(1)(r) agreement cannot
secure.
I accept that that is so. I am not persuaded, however, that
the availability of those advantages serves to compel the conclusion
that ‘in terms of’ in s 2(1) of the PFA must mean ‘by’
in so far as the funds in question are concerned.
The availability of
those advantages is simply the reason why an industrial council will
probably, most times, prefer establishment
in the way the funds in
issue were established. But it does not warrant the conclusion that
establishment in the present case was
establishment other than ‘in
terms of’ the published agreement.
[19] Turning to the matter of legislative purpose and
context there is, first, the consideration that these funds were the
product
of collective bargaining every bit as much as a fund
established ‘by’ a published agreement. On the face of it
the legislature
would have had good reason, therefore, to intend that
whichever mode of establishment was resorted to the fund concerned
would remain
an industry fund and be exempt from the provisions of
the PFA.
[19] As to the legislative purpose in enacting the PFA,
counsel for the appellant endeavoured, unsuccessfully, to find
relevant parliamentary
material bearing on the subject. All that the
Annual Survey of South African Law, 1956 tells one (at 398) is that
parliamentary investigation
had revealed the existence of a
multiplicity of private pension funds nationwide whose combined
assetholding was very extensive indeed.
The Act was therefore passed
in order to provide for the registration and regulation of such
funds. Section 2(1) appears, however,
to have been intended to let
industrial council funds go their own way. There is no ground for
concluding that, seen against that
background, the legislature would
have thought that industrial councils could not cope adequately with
the needs of funds established
and operating in the way of the EIMF.
[20] Agreements published under s 48 of the 1956 LRA
constitute subordinate domestic industrial legislation
2
.
It would have been illogical and frankly remarkable had the
legislature intended that an industrial council fund, having been
brought
into being in that legislative environment, were to be hived
off and, for the rest of its existence, to be governed by entirely
different
legislation. And, what is more, without any express
legislative provision effecting the severance, and pointing the new
direction,
such as was passed in 1998.
[21] Furthermore, the body of industrial agreements
emanating from a particular council is designed to establish a
coherent system
of labour relations within the industry concerned.
3
It would not make for such intra-industry coherence, or
consistency, were the contention for the appellant to prevail.
[22] Overarching all the points already discussed is
this consideration. The enactment in issue has been on the statute
book for over
50 years but the court is, of course, enjoined by s
39(2) of the Constitution
4
now to interpret the legislation in a way that promotes
the spirit, purport and objects of the Bill of Rights. In my view it
gives
due expression to the industrial council parties’ freedom
to bargain collectively to resolve matters of mutual concern to adopt
that interpretation of s 2(1) of the PFA according to which the
exempted funds are not only those established
by
a gazetted agreement but also those established
pursuant
to or in
accordance
with
such an agreement. In that way both kinds of fund are administered
implemented and, if needs wound up according to the terms
and
provisions collectively bargained for.
[23] I conclude, therefore, that the EIPF (then
differently named) was established pursuant to and thus ‘in
terms’ of
the agreement published on 19 July 1957.
[24] The MIPF was not in all ways comparable with the
EIPF but it was nevertheless sufficiently similar in material
respects that
the parties to the appeal approached the matter on the
basis that what counted for the one counted also for the other.
[25] It follows that the two funds in issue are exempt
from the provisions of the PFA and that the learned Judge in the
court
a quo
was right.
[26] The appeal is accordingly dismissed. First
appellant is to pay the costs including the costs of two counsel.
_________________________
CT HOWIE
PRESIDENT
SUPREME
COURT OF APPEAL
CONCUR:
BRAND JA
PONNAN JA
MUSI AJA
HEHER JA:
[27] The primary question in this appeal is whether the
ENGINEERING INDUSTRIES PENSION FUND (the EIPF) and the METAL
INDUSTRIES PROVIDENT
FUND (the MIPF) were:-
‘
established in terms of an agreement
published or deemed to have been published under section 48 of the
Industrial Conciliation Act,
28 of 1956 . . .’
5
[28] The answer to that question determines whether the
EIPF and the MIPF are subject to the provisions of the Pension Funds
Act 24
of 1956 (the PFA) and properly registered thereunder or
whether in terms of section 2(1) of the PFA the provisions of that
Act are
not applicable to them and accordingly their existing
registrations are void and of no effect.
[29] The respondents in the appeal the employer trustees
of the two funds, and the Steel and Engineering Industries Federation
of
South Africa. They applied to the Pretoria High Court for an
order:
‘
1. Declaring that:
1.1 The provisions of the
Pension Funds Act, No. 24 of 1956
, as
amended (“the PFA”) do not apply in relation to the
Second and Third Respondents.
1.2 The purported registration by the First Respondent of the Second
and Third Respondents as pension fund organizations in terms
of
Section 4
of the PFA, is of no force and effect.
1.3 The Second and Third Respondents are not obliged to comply with
any provision of the PFA, including the obligation imposed by
Section
15B
thereof upon the board of a fund to submit to the First
Respondent a scheme for the proposed apportionment of any actuarial
surplus
in the Fund, save for the requirement in
Section 2(1)
thereof
that “a pension fund shall from time to time furnish the
Registrar with such statistical information as may be requested
by
the Minister.”
2. Ordering the First Respondent to cancel the certificates of
registration issued to the Second and Third Respondents respectively,
purportedly in terms of
Section 4(4)
of the PFA.’
The appellants opposed the relief claimed. Hartzenberg J
granted the order as prayed but granted leave to appeal to this
Court. The
second appellant, the National Union of Metal Workers of
South Africa, did not pursue the appeal and was not represented
before us.
[30] The first appellant contends that:-
(a) the exemption applies only where the fund was
created and came into existence as a result of the promulgation of an
industrial
council agreement under section 48 of the Industrial
Conciliation Act 28 of 1956 (hereinafter referred to as ‘the
Act’);
(b) the EIPF and MIPF were created and came into
existence because a constitution and rules for each fund was adopted
in 1957 and
1991 respectively and not in terms of any industrial
council agreement;
(c) the industrial council agreements relied on by the
Respondents expressly state that the EIPF and MIPF are established
other than
in terms of those agreements and they should be taken at
their face value;
(d) the fact that industrial council agreements were
published in order to facilitate the collection of contributions to
the funds
does not mean that the funds were established in terms of
those agreements.
[31] Subject only to the submission which is dealt with
in paragraphs 12 and 41
et seq
below,
the respondents stand or fall by the submission that the phrase ‘in
terms of’ in s 2(1) is to be given a wide meaning:
any fund
established
in pursuance
of
a published agreement is excluded. The EIPF and the MIPF, are they
contend, funds so established.
The establishment of the EIPF
[32] On the 28
th
August 1957 at a meeting of duly authorized
representatives of prospective parties to a Metal Industries Group
Life and Provident
Fund (as the EIPF was originally known) it was
resolved to adopt a constitution and rules.
[33] The constitution establishes the EIPF as a fund all
the assets of which vest in its Board of Management and capable of
suing
and being sued in its own name. Provision is made for the fund
to be wound up in terms of its rules subject to those not being
inconsistent
with the PFA. The rules of the EIPF
provide
in conventional form for the fund to operate a defined benefit
pension scheme. They deal with membership of the fund, the
payment of
contributions, the benefits due to members and the financial
administration of the fund.
[34] Although the constitution and
rules were published in the Government Gazette on the 8
th
November 1957, that did not take
place in terms of section 48 of the Act, which had commenced on the
1
st
January 1957, or its predecessor. The
publication does not state why or by whom they were being published
but correspondence produced
to us suggests that they were published
for purposes of ‘information’.
[35] Clause 2(b) of the rules provides that
contributions to the fund:-
‘
. . . shall be made in accordance with the
provisions of the Agreement in terms of the Industrial Conciliation
Act currently providing
for contributions to this, the Metal
Industries Group Life and Provident Fund.’
That is a reference to an agreement that was published
in terms of sections 48(1)(a) and (b) of the Act on 19 July 1957,
which provided
for the payment of contributions to a fund ‘to
be established’ and known as the Metal Industries Group Life
and Provident
Fund. It is this agreement upon which the respondents
relied in both courts as the agreement in terms of which the EIPF was
established
for the purposes of s 2(1) of the PFA.
[36] All of these events occurred
before the PFA came into force on the 1
st
January 1958 although that must have
been anticipated as the Act had been passed the previous year and, as
I shall show, there are
clear indications in the constitution and
rules that the compilers were careful to follow the requirements of
the PFA. Initially
the EIPF did not register in terms of the PFA but
did so in January 1964.
[37] Since 1958 the EIPF has continued to operate in
terms of its constitution and rules and these have been altered from
time to
time in terms of the provisions governing such amendments. At
all times there has also been in operation an agreement duly
promulgated
initially and subsequently continued from time to time
under the Act and afterwards under the
Labour Relations Act, 66 of
1995
providing for contributions to be made to the EIPF and the
collection of such contributions.
[38] It is not suggested by any party
that these changes over the years have affected the ‘establishment’
of the EIPF.
However, in the event of their primary argument failing
the respondents advance a secondary argument that the EIPF became
exempt
by virtue of the provisions of clause 3A of the 1991 agreement
dealing with contributions.
6
The establishment of the MIPF:
[39] On the 22
nd
March 1991 at a meeting of duly
authorised representatives of prospective parties of the MIPF it was
resolved to adopt a constitution
and rules. The constitution
establishes the MIPF as a fund all the assets of which vest in its
Board of Management and capable of
suing and being sued in its own
name. Clause 11(b) provides that any addition or alteration to the
constitution and the rules shall
be submitted to the Registrar of
Pension Funds for approval in accordance with the PFA.
[40] The rules of the MIPF are to similar effect as
those of the EIPF. Neither the constitution nor the rules of the MIPF
was published
in the Government Gazette.
[41] Clause 2(1) of the rules of the MIPF provides that
contributions shall be made in accordance with the provisions of the
Industrial
Agreement ‘relating to the fund’ as published
in terms of the relevant sections of the Labour Relations Act, 1956.
That
initially referred to an agreement published in terms of section
48(1)(a) and (b) of the Labour Relations Act, 28 of 1956 on 19 April
1991 which provided for the payment of contributions to inter alia
the MIPF which is defined in the agreement as ‘the Metal
Industries Provident Fund, to be established’. It is this
agreement upon which the respondents relied in both Courts as the
agreement in terms of which the MIPF was established for the purposes
of s 2(1) of the PFA.
[42] As with the EIPF the published
agreement has altered over the years and the Respondents also advance
their secondary argument
in relation to that agreement by virtue of
the provisions of clause 4 of the 1998 version of the agreement
dealing with contributions.
7
[43]
The
reasons for the exception in relation to pension funds established
under industrial council agreements.
17.1 The PFA was the first statutory regulation of
private pension funds in South Africa. It created the office of the
Registrar of
Pension Funds and conferred the powers that enabled the
Registrar to regulate pension funds. Those required in the first
instance
that all pension fund organisations should register in terms
of the PFA and that their constitutions and rules and any amendments
thereof should be subject to approval by the Registrar.
17.2 Since at least 1937 and the enactment of the
Industrial Conciliation Act in that year, industrial councils
established and operating
in terms of that Act had possessed the
power to establish pension funds in terms of industrial council
agreements and those agreements
could be made binding on the entire
industry by way of promulgation by the Minister of Labour in terms of
section 48 of that Act.
Accordingly when the PFA was being enacted
consideration had to be given to the relationship between pension
funds established in
terms of the 1937 Act (which was simultaneously
being replaced by the 1956 Act) and the regulatory regime being
established generally
in respect of pension funds.
17.3 The scheme of regulation
contemplated by the PFA was in material respects inconsistent with
the operation of a pension fund in
terms of an industrial council
agreement. Primarily those practical problems flowed from the fact
that the industrial council pension
fund was the product of
collective bargaining in the council with oversight by the Minister
of Labour in deciding whether a particular
agreement should be
rendered binding under section 48.
8
This made it fundamentally different
from the conventional private sector pension fund put in place by an
employer for the benefit
of its employees.
9
17.4 For a fund to be registered under the PFA its
constitution and rules had to be approved by the Registrar. The PFA
contained no
mechanism for dealing with a situation where the
Registrar did not approve of a provision in the constitution and
rules which had
been agreed upon by parties to the industrial
council. If it was agreed in the annual round of collective
bargaining in the council
that contribution rates be increased or
benefits improved or the pension fund be varied in some other
respect, that could ordinarily
be implemented relatively easily by
way of an amendment to the industrial council agreement that was
promulgated by the Minister.
If the amendment required also to be
approved by the Registrar of Pension Funds under section 12 of the
PFA this would create a substantial
risk of delay and even the
possibility that the Registrar might not approve on actuarial
grounds. In that event the result would
be that a collectively
bargained wage agreement might not be put into operation and this
could give rise to the possibility of industrial
unrest.
17.6 There were significant
differences between a pension fund operating under the PFA and a
pension fund operating under an industrial
council agreement. Under
the PFA the fund was constituted as a separate legal entity and its
funds were owned by it and no-one else
whatever the origin of the
fund might have been.
10
Where the fund was created and
operated in terms of an industrial council agreement it did not
become a separate entity even though
separate bank accounts and
records might be maintained. Accordingly the funds remained the
property of the industrial council as
the mere fact of their being
paid into a separate account did not have the effect of conferring
title on a fund that had no separate
existence.
11
This rendered them vulnerable to any
financial difficulties besetting the industrial council. In addition
the restrictions applicable
to investments by an industrial council
12
applied to them and on liquidation
any surplus accrued to the industrial council. Furthermore if the
industrial council ceased to
exist the pension fund would suffer the
same fate.
17.7 In addition the degree of regulation and oversight
exercised by the Registrar of Pension Funds over pension funds in his
or her
jurisdiction was far more extensive than that of the Minister
of Labour or the industrial registrar over the operations of a
pension
fund conducted in terms of an industrial council agreement.
No doubt this explains the more stringent requirements in regard to
the
range of investments that such a fund could make.
17.8 Having regard to these not insignificant
differences, I think counsel for the first appellant was justified in
submitting that
the regulatory regime contained in the PFA would have
been difficult to apply to pension funds created and operating in
terms of
industrial council agreements. That difficulty would not
arise if the industrial council decided that a pension fund should be
established
on conventional lines as a separate legal entity deriving
its existence and powers from its own constitution and rules. In that
event
there was no reason for it not to be under the regulatory
supervision of the Registrar of Pension Funds. Indeed as such a fund
would
be subject to very little oversight by the Minister of Labour,
because only its agreement in respect of the collection of
contributions
would be subject to his or her jurisdiction under
section 48 of the Industrial Conciliation Act, it was highly
desirable that it
be subject to the same regulatory regime as other
similarly constituted pension funds.
17.9 This examination of the underlying reasons for the
exception supports the first appellant’s construction of
section 2(1)
of the PFA.
17.10 By contrast, the respondents’ counsel were
unable to suggest any good reason why pension fund organisations
established
as were the MIPF and the EIPF would find any problem at
all in accommodating the yoke of the PFA. The constitution and rules
of both
funds reflect no characteristics in conflict with the PFA.
Indeed both have recognised and observed the regime established under
that legislation through much the greater part of their existence.
The interpretation of s 2(1) of the PFA
[44] The answering affidavit makes it
clear that the Registrar of Pension Funds has interpreted and applied
s 2(1) in a particular
sense since the PFA came into operation. In
addition, t
he Deputy Registrar of Pension
Funds deposed in the present proceedings that
’
21. According to the records under my
control there are only 5 pension funds that are established in terms
of industrial agreements.
These funds have no separate constitutions
and the basis upon which they operate appears from the published
industrial agreements.
(These agreements are now collective
agreements under the present LRA.)
22. These funds are relatively small having a total membership in
2003 of approximately 114 000 and they have correspondingly
small funds under administration, with only R1,388 billion in total
assets.
23. By contrast there are many funds that have been established on a
basis similar to that of the Second and Third Respondents. In
the
time available to prepare this affidavit I have not been able to
obtain membership figures for these funds or figures relating
to the
total assets they have under administration. However I can say with
confidence that they will have more than a million members
and
pensioners and the funds they administer run into several hundred
billion Rand.
24. The importance of these funds cannot be overstated. They
represent a significant proportion of the funds under the
jurisdiction
of the First Respondent and a significant proportion of
the total number of pension fund members and pensioners and the total
amount
under administration in pension funds in South Africa.
25. According to the First Respondent at the 31
st
March
2004 had 30 227 members and 42 777 pensioners and administered funds
totalling some R 23 billion.
26. According to those records the Third Respondent on the same date
had 202 661 members and administered funds totalling some R
11
billion.
27. If the Applicants are correct all of these funds will cease to be
subject to any regulation whether by the First Respondent or
anyone
else. That would not only be an extraordinary situation, when it has
always been accepted that they are subject to regulation
under the
PFA, but potentially harmful to the interests of the members and
pensioners. I say this not specifically in relation to
the Second and
Third Respondents but as a general reflection of the risks involved
in having such a significant portion of the pension
funds industry
not subject to any regulatory oversight.
28. Amongst the regulatory provisions that are important in this
regard are those dealing with the apportionment of actuarial surplus
contained in Chapter IV of the PFA.
29. It is apparent that the impetus for this application is an
attempt to avoid the statutory provisions relating to the
apportionment
of actuarial surplus and the payment of minimum
benefits to pensioners and former employees in the relevant industry
as provided
for in those provisions.’
The EIPF has recognised the authority of the PFA and the
Registrar for forty years and the MIPF for at least ten. Rights have
been
acquired and exercised and obligations fulfilled in accordance
with that interpretation without apparent dissent by interested
parties.
[45] In
R
v Lloyd
1920 AD 474
at 477 Juta JA said
‘
This it appears has been the view taken for
thirty years, since the passing of the Act, by those responsible for
its administration,
by the trade itself and by the Natal Court, which
however has never pronounced on it. This of course would not justify
the placing
of a construction on the section which the language would
not allow; and if that language were clear such a view, though
established
for thirty years and upon which vested rights of various
kinds must necessarily have become based, could not influence the
construction;
but where the language is anything but clear and is
capable of various constructions leading to most curious anomalies as
appears
from the judgments themselves of the magistrate and of the
court below, and is capable of the construction contended for, then
the
fact that it has been so construed by everyone concerned for
thirty years since it came into operation is an element to be
considered.’
And Mason AJA (at 486):
‘
Custom, though said to be the best
interpreter, does not dictate absolutely the construction of
statutes; but, where a statute may
fairly be interpreted in either of
two ways, custom may well be invoked to tip the balance.’
See also
R
v Detody
1926 AD
198
at 202-3 and
Ellert
v Commissioner for Inland Revenue
1957
(1) SA 483
(A) at 490G-H. That the expression ‘in terms of’
is inexact and tends to invite different emphases in a statutory
context
is obvious from the reported cases. It appears to me that its
use in s 2(1) provides a clear example of a statutory provision which
may fairly be interpreted in either of two ways, one narrow, the
other broad. It is, to say the least, anomalous that the Registrar
(and the members of the funds) should now be told that every
amendment approved at the instance of the EIPF board by the Registrar
since 1964 was
ultra
vires.
Given the
long and uncontested construction placed on it by the Registrar and
interested parties and the matters of great public consequence
to
which the Registrar has deposed, I am satisfied that this Court would
be unwise to depart from that construction merely to serve
the
expedient interests of the present trustees of the two funds.
13
On this basis alone the appeal should
be upheld.
[46] I am, however, of the view that a narrower
interpretation better fits the exclusionary purpose of s 2(1) as
discussed above and
the intention of the legislature in so far as
that can be determined from its chosen language.
[47] The connecting phrase ‘in terms of’ has
a wide range of possible nuances depending on the context in which it
is
placed. However, to describe something as ‘established in
terms of’ considerably limits its range, suggesting as it does
a connection between a creative act and the origin of the power to
perform such an act. That the establishment is to be ‘in
terms
of an agreement published or deemed to have been published under
section 48 of the Industrial Conciliation Act, 1937’
narrows
the field of operation still further. An agreement which has been so
published has a binding effect on the parties to the
agreement and
their members (if published under s 48(1)(a)) and upon all employers
and employees in the particular industry to which
the agreement
relates (if published under s 48(1)(b)). It appears, therefore, that
the legislature intended to exclude from the operation
of s 2(1)
those funds to which the parties and others in the industry were
legally committed by the publication, bearing in mind
that a
published agreement has statutory force and breaches of its terms
constitute criminal offences (s 53(1) of the Act read with
s
82(1)(b)).
[48] It is hardly conceivable that the legislature could
in the circumstances have intended to extend the exclusion in s 2(1)
of the
PFA to a fund established in consequence of (or in pursuance
of) an agreement in which the principle of its establishment was
agreed
but most of the detail was left over for later determination
by the parties or the council without the need for further
publication
under s 48 of either the fact of its establishment or the
substance of the constitution and rules of the fund. The publications
which
did take place under s 48 did not oblige the parties to
establish the funds. In relation to neither of the two funds in
question
was there a later publication under s 48. The particulars of
the contemplated funds as one may derive then from the agreements
fall
far short of the substance eventually emerging, presumably as a
result of private agreement between the representatives of employers
and employees outside of the bargaining council. I conclude,
therefore that neither fund was one established in terms of a binding
agreement within the scope of the exclusion.
[49] If I am wrong in so interpreting s 2(1) narrowly
and ‘in terms of’ properly deserves a more lenient slant,
my conclusion
would be the same. Even on the most generous
interpretation of the connecting phrase neither fund was established
in terms of the
agreement which preceded its creation. My reasons for
reaching this conclusion are set out in the succeeding paragraphs.
[50] Both agreements were reached in the
statutorily-created bargaining council for the particular industry.
Each was duly published
by the Minister at the request of the council
as the agreement of the parties to the council. When the legislature
refers in s 2(1)
of the PFA to such agreements it necessarily means
only those agreements the content of which is a
statutorily-authorised subject
of approval by a council and which
falls within the powers conferred on it.
[51] When, therefore, a pension fund is established
(directly or indirectly) in terms of an agreement, the fund must be
one which
the council is empowered to create and not one which may be
created at the will of the parties to the council without recourse to
its powers. That it is intended to serve the industry and does so
cannot of itself be the determining factor.
[52] It is accordingly necessary to examine the scope of
the powers conferred on a council in relation to the creation of
funds. Once
the limits are determined there will, I suggest, be no
difficulty in deciding whether the MIPF and the EIPF qualify as funds
established
in terms of the published agreements which are relied
upon by the respondents as removing them from the ambit of the PFA.
[53] The statutory competence of parties to a council to
enter into agreements which may be declared binding under s 48
derives from
ss 23 and 24 of the Act. The relevant provisions are
‘
23. (
1) An
industrial council shall, within the undertaking, industry, trade or
occupation, and in the area, in respect of which it has
been
registered, endeavour by the negotiation of agreements or otherwise
to prevent disputes from arising and to settle disputes
that have
arisen or may arise between employers or employers’
organizations and employees or trade unions and take such steps
as it
may think expedient to bring about the regulation or settlement of
matters of mutual interest to employers or employers’
organizations and employees or trade unions.
(2) The parties to an industrial council registered in respect of any
activity carried on by a local authority shall have the power
to
enter into an agreement such as is referred to in sub-section (1)
notwithstanding anything to the contrary contained in any law
regulating the affairs of the local authority concerned.
24.
(1) An agreement which may be declared binding under
section forty-eight may include provisions as to all or some or any
of the following
matters-
. . . (r)
the establishment of pension, sick, medical,
unemployment, holiday, provident and other insurance funds, and the
levying upon employers
and employees of contributions towards such
funds or towards similar funds established by or in terms of the
constitution of the
council;
and, generally, as to any matter affecting or connected with the
remuneration or other terms or conditions of employment of all
employees
or of the members of any class or classes of employees
whether remunerated according to time worked or work performed or on
any other
basis, or as to any matter whatsoever of mutual interest to
employers and employees, the scope of this provision not being
limited
in any way by the mention in this sub-section of particular
matters.’
(Corresponding provisions were contained in ss 23 and
24(1) of the 1937 Act.)
The statute provides no other basis for establishing a
pension fund whether by, in or in pursuance of an agreement capable
of publication
under s 48.
[54] When a fund is established by, in or in pursuance
of such an agreement, the agreement once published is the agreement
of the
council. Section 24(3) provides:
‘
(3) Any industrial council may by
resolution admit to membership of any fund such as is referred to in
paragraph
(r)
of
sub-section (1) any office-bearer, official or employee of the
council or of any of the trade unions or employers’
organizations
which are parties to the council, in which event such
council, union or organization and any person so admitted shall, for
the purposes
of the relative provisions of the agreement or
constitution by which or in terms of which such fund has been
established, be deemed
to be an employer and employee respectively in
the undertaking, industry, trade or occupation in respect of which
the council is
registered.’
[55] The assets in the fund thus established form part
of the assets of the council which, in terms of s 20(1) becomes a
body corporate
on registration capable of holding and alienating
property. For this reason the legislature deemed it necessary to
distinguish on
the dissolution of a council, whether in consequence
of winding up (voluntary or compulsory) or for the other reasons
referred to
in s 34(1), between the disposal of the unexpended
general funds of the council (dealt with in s 34(4)) and the assets
of the pension
fund established by an agreement of the parties to the
council (in s 34(5)) as follows:
‘
(5) The provisions of sub-section (4) shall
not apply to any fund established by a council for a purpose other
than that referred
to in paragraph
(q)
of sub-section (1) of section
twenty-four
,
nor to any such funds as are referred to in paragraph
(r)
of sub-section (1) of section
twenty-four
,
which shall be disposed of in accordance with the provisions of the
constitution or agreement under which they were established,
or, if
that constitution or agreement does not contain any provisions in
regard thereto, then in accordance with the directions of
the
registrar.’
[56] In the two cases under consideration each
industrial council certainly contemplated and may, in the broadest
sense, be said to
have authorized the establishment of the fund. But
the agreement which it requested the Minister to publish did not
purport to establish
a fund: in terms each agreement provides for the
levying and collection of contributions for a fund ‘to be
established’.
The parties to the application to court, who
might reasonably be expected to have access to the resolutions of
their respective councils
did not produce a resolution by either
council to establish a fund. They did not request the Minister to
publish a notice under s
48 in which the establishment of the fund
was confirmed.
[57] The industrial council concerned did not, as such,
participate in the establishment of either fund. The parties to the
establishment
were its employer and employee members, but they too
did not purport to represent their councils. Indeed there is nothing
in the
constitution and rules of either which involves the councils.
Each fund was established with its own corporate personality and
power
to hold and alienate assets in terms of a constitution and
rules. Its existence was not coterminous with or dependent on the
continued
existence of the council. The fund rules purported to admit
to membership of the funds the office-bearers, officials and
employees
referred to in s 24(3) of the Act. But there was no
resolution produced as required by that section (as, of course, there
could not
be for funds set up as independent bodies corporate). There
was thus no legal identity between the pension fund which each
council
was empowered to establish by s 24(1)(
r
)
(and the establishment of which had been presaged in the published
notices) and the funds which in fact came into being, albeit
that
they served the same interests. In the circumstances neither fund was
established in terms of the relevant industrial agreement
in the
sense intended by the legislation.
[58] The status of a fund must judged objectively having
regard to what was actually established and not by the intention of a
council
in concluding and publishing an agreement no matter how plain
that may be. In the instance of the EIPF its constitution and rules
(at its foundation) were unequivocal in subjecting the fund to the
PFA and its regulatory system.
[59] The objects of the EIPF include
‘
3(a) To establish, organize and provide
pension and death benefits for the employees of employers in the
group of industries known
as the Iron, Steel, Engineering and
Metallurgical Industries in the Republic of South Africa and such
other industry/industries in
the Republic as may from time to time be
admitted to participate in the Fund by the Board of Management in
terms of this Constitution,
and benefits for the dependants of such
employees for which purpose the Fund may receive moneys payable by
premiums, contributions,
donations or otherwise.’
An industrial council possessed no powers under s 24 of
the Industrial Conciliation Act 1937 (or its successor sections) to
establish
a pension fund which could provide membership to persons
employed outside the industries for which the council is established
as
the constitution of the fund confers on its board.
[60] The constitution of the EIPF then (and now)
contains the following provisions:
‘
6(c) If the principal executive officer is
absent from the Republic for more than 30 days or is otherwise unable
to perform his duties,
the Board of Management shall appoint another
person to act as principal executive officer for the period of his
absence or disability
and shall notify the Registrar of Pension Funds
of such person’s name.’
. . .
‘
11(b) Notwithstanding anything to the
contrary contained in the Constitution or Rules, any addition or
alteration to the Constitution
and/or Rules shall be submitted to the
Registrar of Pension Funds for registration in accordance with the
Pension Funds Act, 1956
. . . ’
’
12. The Fund may be wound up at any time
subject to the unanimous agreement of the Steel and Engineering
Industries Federation of
South Africa and the Employees’
Organisations in Annexure 1, whereupon the distribution and winding
up provisions set out in
the Rules shall apply.’
[61] The rules of the MIPF include the following
clauses:
‘
2. INTERPRETATION
(i) “Act” shall mean the
Pension Funds Act, 1956
and the
regulations framed thereunder.
. . . .
(xxviii) “Registrar” shall mean the Registrar of Pension
Funds appointed under the Act.’
‘
15. WINDING UP
(a) If circumstances arise at any time which, in the opinion of the
Board, render the winding up of the Fund desirable or necessary,
the
Board shall, with the unanimous approval of the Steel and Engineering
Industries Federation of South Africa, and the Employees’
Organisations listed in Annexure 1 of the Constitution, appoint a
liquidator approved by the Registrar in terms of Section 28(2)
of the
Act. Such liquidator shall be empowered to wind up the Fund in which
event the assets shall be divided among the Members and
beneficiaries
on such terms and in such manner as the liquidator, acting on the
advice of the Actuary with the approval of the Steel
and Engineering
Industries Federation of South Africa and the Employees’
Organisations listed in Annexure 1, may determine.’
This was not simply a case of ‘an equitable
example to follow’ (to quote Howie P
14
).
The parties here resorted to the authority of the Registrar and the
statutory liquidator. Both are creatures of the PFA, neither
possessing powers outside those which it confers on them, and then
only in relation to funds which are governed by its provisions.
[62] In certain respects the position of the MIPF is, if
possible, clearer than that of the EIPF. It was established more than
thirty
years after the PFA came into operation. Its constitution and
rules, on establishment, expressly recognized the authority of the
PFA and the Registrar of Pension Funds. On 2 April 1991, less than
two weeks after the parties approved its constitution and rules,
it
applied for registration under s 4 of the PFA. Even if, in so
establishing the fund, they intended to give effect to the published
agreement (and no-one has so deposed) the reality was otherwise.
[63] We were furnished by counsel for the appellant with
copies of a notice published under s 48(1) of the 1937 Act in which
the Cape
Clothing Industry Provident Fund was established by the
industrial council for that industry (published in GG No 242 of 12
March
1954 under GN 493) and which fully bears out the
characteristics attaching to a fund established under the powers
conferred by s
24(1), as I have identified them and illustrates the
differences between the establishment of such a fund and one deriving
its life
from an agreement extraneous to the council.
[64] We were also provided with a copy of a continuation
agreement for Provident Fund of the Leather Industry published in
terms of
s 48(1) in GG No 8135 of 2 April 1982 under GN R640 in which
is contained the full terms of the fund’s constitution and
rules.
This agreement also is signed by the representatives of the
industrial council. It too on examination bears the true nature of an
agreement which gives effect to s 24(1)(
r
).
[65] The conclusion is inevitable: what was in fact
generated by the parties was not a fund contemplated by the
Industrial Conciliation
Act whatever germ of creation may be
discerned in the published agreement which preceded it.
[66] This judgment was written as a dissent in
anticipation of receiving a majority judgment to the contrary effect.
Having now had
sight of that judgment I wish to add only this. The
use of the expression ‘as to’ in the opening sentence of
s 24(1)
of the Act means no more than ‘in relation to’.
It precedes a long list of matters with which an industrial council
may
deal but does not reflect on the scope of those matters. If ‘in
terms of’ in s 2(1) possesses a broad meaning then I
have no
doubt that an agreement could lawfully provide for the establishment
of a fund without actually establishing it and that
such a fund could
be established subsequently by the members of the council acting in
that capacity. But before the exclusionary
provisions of s 2(1) can
operate
(a) the establishment of the fund and not merely the
intention to establish it must be the subject of a published
agreement;
(b) the council must be a party to the establishment;
(c) the substance of the fund (as embodied in its
constitution and rules) must be such as the council itself has the
power to establish.
As I have tried to show in this judgment the
establishment of the MIPF and EIPF fails on all these counts.
[67] In its replying affidavit the first respondent
stated:
‘
The applicants do contend that even if they
were not established in terms of Industrial Council Agreements which
were published by
the Minister of Labour, they would nevertheless be
exempt from the provisions of the LRA if they were ‘continued’
as
contemplated by Section 2(1).’
[68] This is an unsustainable contention. The use of the
word ‘continued’ clearly relates to the finite existence
of a
fund under the labour legislation. As pointed out above each
fund so created endures only for the life of the council under the
aegis
of which it operates. However the practice has always been that
such life is continued by the publication agreement of an extension
notice, usually for the same period as before. In this manner the
fund is continued from time to time. The ‘continuation’
for which provision is made has nothing to do with a fund originally
established outside of the labour legislation and subject to
the PFA.
It is directed solely at ensuring that funds established under s
24(1)(
r
) do not lose
their exempt status on the expiry of the initial period for which
they were established. The fact of such extensions
by publication
under the labour legislation is indicative of an understanding on the
part of those responsible for publication that
the funds were
established under the powers of a council but cannot decide the issue
of whether the funds are subject to the PFA
or not.
[69] For these reasons I would uphold the appeal with
costs including the costs of two counsel, and set aside paragraphs 1,
2, 3 of
the order of the court
a quo
replacing it with an order in the following terms:
‘
The application is dismissed with costs
such costs to include the costs of two counsel.’
_________________
J A HEHER
JUDGE OF APPEAL
1
Oosthuizen
v Standard Credit Corporation Ltd
[1993] ZASCA 59
;
1993
(3)
SA 891
(A) at 900J-901B and 909J-910I,
and
Slims (Pty) Ltd v Morris NO 1
988
(1) SA 715
(A) at 733B-G and 744G-H
2
S
v Prefabricated Housing Corporation (Pty) Ltd.
1974
(1) SA 535
(A) at 540A-B
3
Photocircuit
SA (Pty) Ltd v National Industrial Council for the Iron, Steel and
Metallurgic Industry
[1996] 17 ILJ
479(A)
4
See
39(2) says that when interpreting
any
legislation, and when developing the common law or customary law,
every court, tribunal or forum must promote the spirit, purport
and
objects of the Bill of Rights.
5
Section
2(1)
of the
Pension Funds Act 24 of 1956
.
As originally enacted the section read: “The provisions of
this Act shall not apply in relation to any pension fund which
has
been established in terms of an agreement published or deemed to
have been published under section 48 of the Industrial Conciliation
Act, 1937 (Act No. 36 of 1937) except that such fund shall from time
to time furnish the Registrar with such statistical information
as
may be prescribed by the Minister.” This was the relevant
provision in 1958 in regard to the EIPF and in 1991 in regard
to the
MIPF, save that the reference to section 48 of the Industrial
Conciliation Act 1937 was to be read as referring to section
48 of
the Industrial Conciliation Act 28 of 1956. The remaining
legislative changes do not affect matters.
6
The
clause states that the EIPF ‘is hereby continued’.
Reliance is placed for this argument on the current wording of
section 2(1) of the PFA which refers to a pension fund ‘which
has been established or continued in terms of a collective
agreement’.
7
‘
(1)
The Metal Industries’ Provident Fund . . . established in
terms of Government Notice No R 624 of 19 April 1991, is hereby
continued.’
8
The
process was one of enacting subordinate delegated legislation.
S
v Prefabricated Housing Corporation (Pty) Ltd and another
1974
(1) SA 535
(A) at 539F-540B.
9
Those
funds appear to have been established as trusts which was in
accordance with the practice in England. See
Ex
parte Trans-African Staff Pension Fund
1959
(2) SA 23
(W) at 27G-H.
10
Tek
Corporation Provident Fund and others v Lorentz
1999
(4) SA 884
(SCA) at 894B-C.
11
Vereins-und
Westbank AG v Veren Investments and others
2002
(4) SA 421
(SCA) para 14, p 430C-E.
12
Section
21(3) restricted the permissible investments of funds established
under industrial council agreements. Only the industrial
registrar
could permit them to invest in assets other than those specified.
Whilst pension funds were subject to some investment
restrictions
they were not as extensive.
13
It
is common cause that the sudden interest of the funds in removing
themselves from the ambit of the PFA was occasioned by the
availability of large surpluses and a desire to dispose of them in a
manner which conflicted with regulatory mechanisms of the
PFA.
14
Paragraph
17 of the judgment.