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[2015] ZAFSHC 200
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Heunis v Letsweleputswa District Municipality and Another (2635/2015) [2015] ZAFSHC 200; (2016) 37 ILJ 895 (FB) (29 October 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION BLOEMFONTEIN
Case
No: 2635/2015
JACOBUS
HEUNIS
Applicant
and
LETSWELEPUTSWA
DISTRICT MUNICIPALITY
1
st
Respondent
FREE
STATE MUNICIPAL PENSION
FUND
2
nd
Respondent
Heard:
22
October 2015
Delivered:
29 October 2015
MOCUMIE,
J
[1]
This matter has as its genesis, the applicant’s retrenchment
from the employ of the 1
st
respondent, Lejweleputswa
District Municipality (the municipality) on operational requirements.
This, the applicant asserts was
the trigger of the municipality’s
obligation to have made payment of the amount contemplated in section
38A(a) of the Free
State
Pensions Fund Act 1956
. The applicant
therefor approaches this court for an order in the following terms:
‘
1. That the first respondent be
ordered – in specific performance its contractual obligation
imposed by
section 38A
(a) of the second respondent’s
statutes - to contribute a lump sum to the applicant’s pension
fund, held and
administered by the second respondent under pension
number 08100018, within 30 days of the granting of this order;
2. That the first respondent be
ordered to appoint an actuary or suitably qualified expert to
calculate said lump sum in accordance
with the provisions of
section
38A(a)
of the second respondent’s statutes;
3. That leave be granted to the
applicant to approach this court for further relief in the event that
a dispute arises over the
calculation of the aforesaid lump sum;
4. That the first respondent be
ordered to pay the costs of the application.’
[2]
The applicant is an ex-employee of the first respondent and currently
a pensioner, residing in Mossel Bay, Western Cape. The
first
respondent is Lejweleputswa District Municipality (the municipality)
as contemplated in
section 2
of the
Local Government Municipal
Systems Act 32, 2000
with its principal place of business situated at
Welkom, Free State. The second respondent is the Free State Municipal
Pension
Fund (the Fund) registered in accordance with the applicable
provisions of the Pension Funds Act 24, 1956 (the Act) with its
principal
place of business at Kroonstad, Free State.
[3]
The applicant was employed by the municipality for some eighteen
years before he was retrenched on 30 September 2014 due to
operational requirements. From the inception of his employment, 1
December 1996, with the municipality the applicant was compelled
by
the terms and conditions of his employment to become and remain a
member of, and contribute to, a retirement fund (registered
in terms
of the Act) which was established pursuant to s73 (2) of the Local
Government Super Annulation Ordinance, 1938 read with
s 4 of
Ordinance 15, 1996 with effect from 1 April 1965. This obligation was
later subsumed in the municipality’s Human Resources
Policy
Manual (the Policy Manual) read with s73 (2) of the Local Government
Ordinance 8, 1962 which Manual Policy provides:
‘
PART
B
RETIREMENT
FUND
9.2
Subject to any collective agreement an employee appointed on a
permanent or fixed term basis in a post in the permanent
establishment, must become and remain a member of, and contribute to,
a retirement fund recognised by the municipality and registered
in
terms of the Pensions Funds Act 1956.’
[4]
At the time of his retrenchment the applicant served as the Head of
Financial Services of Lejweleputswa Development Agency upon
secondment by the Fund. According to the municipality, in a letter
dated 12 September 2014, annexure FA2 to the paginated papers,
his
retrenchment was necessitated as a result of restructuring and
decentralisation of its organisational structure which resulted
in
the redundancy of his position. The applicant was sixty years of age
at the time of his retrenchment. But for his retrenchment
the
applicant would have retired at sixty five years which is the
compulsory retirement age in terms of the Policy Manual read
with the
applicable provisions of the Fund’s statutes, in particular
clauses 6.11 and 6.12 which provide:
‘
6.11 TERMINATION OF SERVICE
DUE TO THE MUNICIPALITY’S OPERATIONAL REQUIREMENTS
Whenever the Municipality
contemplates-
Dismissing less than 10 employees due
to the Municipality’s operational requirements it shall do so
in terms of section 189(A)
of the Labour Relations Act.
6.12 RETIREMENT
6.12.1 An employee who-
is a member of a retirement fund must
retire on the first day of the month following the month during which
she/he reaches retirement
age as determined by the rules of the fund
concerned; and
is not a member of a retirement fund
must retire on the first day of the month following the month during
which she/he becomes eligible
for a social old age pension.
6.12.2
Subject to the rules of the retirement fund concerned an employee may
terminate her/his services and retire on early pension.
The
employment of an employee who contemplates retiring on early pension
must be terminated on the first day of the month following
the month
during which the retirement fund concerned approved her/his
application to retire.’
[5]
The applicant averred in his Founding Affidavit that ‘at all
times relevant to this application, I was a so called B member
of the
Fund as defined in the Fund’s statutes’ which provides:
‘
B-LID:
‘n lid wat op of na 1 Julie 2000 in terme van Artikel 27
besluit het om die geheel van sy vorige diens oor te skakel
na
alternatiewe voorwaardes seksie;
(Gewysig
1 Januarie 2000)’
[6]
He averred further that on 22 September 2014 the applicant was called
to a meeting with the Municipal Manager, the Chief Financial
Officer,
Human Resource & Legal Manager and Executive Manager of the
municipality. During this meeting he highlighted the application
of
s38A (a) and the CFO undertook to take the matter up with the Fund
and revert back to him. In a letter dated 6 November 2014
addressed
to the Municipal Manager, he reminded the municipality of its
obligation under s38A. None of the four who attended the
meeting of
22 November including the Municipal Manager responded to his query.
He later on in February 2015 gave instructions to
his attorney to
pursue the matter further. Thus these proceedings.
[7]
Mr Van Aswegen, on behalf of the applicant submitted that the fact
that the applicant was a B-member of the Fund; was retrenched
based
on the municipality’s operational requirements; the termination
of his contract of employment fell within the ambit
of s72 of the
Local Government Ordinance, 1962; triggered the provisions of s38A
which provide
[1]
:
‘
NIE VRYWILLIGE BEeINDIGING
VAN DIENS VAN ‘N B-LID
‘
38A.
Indien
‘n B-LID wie se dienste deur die PLAAS BESTUUR beëindig
word soos bepaal in Artikel 72 van die ORDONNANSIE by
wyse van ‘n
versoek aan hom en waaraan hy gehoor moet gee, om af te tree wanneer
hy die ouderdom van twee jaar minder as
die PENSIOENOUDERDOM bereik
het of deur afdanking op grond van vermindering of re-organisasie van
personeel of afskaffing van die
amp of betrekking wat hy beklee, of
om die verbetering van doeltreffendheid of re-organisasie te
vergemaklik, of op grond van algemene
besnoeiing, is geregtig op
voordele soos volg:
(a) ‘n Bedrag gelyk aan die
B-LID se AANGEPASTE LIDBELANG word uitbetaal en die PLAASLIKE BESTUUR
is verplig om die grootste
van sy werkgewer BYDRAES vir die
onverstreke dienstydperk tot PENSIOENOUDERDOM of 8% per jaar van die
LID se AANGEPASTE LIDBELANG
vir die onverstreke dienstydperk tot
PENSIOENOUDERDOM in ‘n enkelbedrag aan die FONDS oor te betaal
wat deel sal uitmaak
van die B-LID se AANGEPASTE LIDBELANG;
(Gewysig 9 Desember 2000)
(a) die kontant
uitdienstredingsvoordeel word aan sodanige LID uitbetaal binne 30 dae
na ontvangs van die nodige belasting
uitklaring van die
Suid-Afrikaanse Inkomstediens en sal verhoog word met rente teen ‘n
kommersiële koers min statutêre
belasting soos van tyd tot
tyd deur die UITVOERENDE KOMITEE bepaal vir die tydperk vanaf
uitdienstrede tot die datum van betaling.
(Gewysig 1 Desember 2000)’
[8]
He submitted further, that once s38 A was triggered off, the
municipality was obliged to
inter alia
pay over to the Fund a
lump sum equal to:
(a)
The total amount that it would have contributed to the Fund between
the period 30 September 2014 and the date of the applicant’s
compulsory retirement age; or
(b)
The total of 8% of the applicant’s annually adjusted pension
fund (which accumulates annually) for the period 30 September
2014 to
date of his compulsory retirement age.
Such
payment had to be effected on 30 September 2014, he argued.
[9]
Mr Van Aswegen contended that, in its opposing affidavit, the
municipality relied on a written agreement. Yet no such agreement
was
appended to the paginated papers. Instead after the applicant filed
its answering affidavit, the municipality then changed
its course and
relied on a settlement which the applicant allegedly accepted in full
and final settlement of his retrenchment.
[10]
Rule 18(6) of the Practice Rules provides that ‘a party who in
his pleading relies upon a contract shall state whether
the contract
is written or oral, and when, where and by whom it was concluded, and
if the contract is written a true copy thereof
or of the part relied
on in the pleading shall be annexed to the pleading.’ Pleadings
are intended to inform the court as
well as the parties of what the
issues are.
[2]
[11]
Mr Van Aswegen correctly submitted that by not appending the written
contract on which the municipality relied in its defence,
it was
accepted by the applicant, as was the case from the onset that there
was indeed no written agreement on which the municipality
could rely
as there was none concluded. The municipality was bound by its plea.
He submitted that pages 22 to 23 of the paginated
papers, which seems
to be what the municipality now relied on as what it termed an
agreement reached with the applicant which was
concluded in full and
final settlement of the applicant’s severance package, to which
the applicant was bound. He submitted
further that that was evidence
introduced through the back door when the shoe started to pinch. But
even if this court took the
so called agreement in full and final
settlement of the applicant’s severance package which the
applicant purportedly agreed
to, he argued, these pages did not
amount to a compromise or waiver or election on the following bases.
The municipality did not
plead such compromise/waiver/election. The
municipality has not averred that
inter alia
it was plain that
the parties intended that it should be in substitution of the
original cause of action. When consideration is
given to pages 22-23
the so called agreement states:
‘
A total amount of R1500 000.00
will be paid to you before tax and is due to you on termination of
your employment which includes
the following:
Ø
Severance pay as per SALGA Main
Collective Agreement
Ø
One month notice pay
Ø
Accumulated leave pay and
Ø
Pro rata bonus.
We have reached this agreement as
outlined in this correspondence and that the termination of your
employment is not based on an
unfair dismissal or the fact that the
municipality rendered your continued employment intolerable…’
[12]
Mr Steenkamp, on behalf of the respondent, submitted that the
municipality negotiated and paid out to the applicant the severance
package plus an additional amount of R400 000. After which the
applicant will have no further claims. During the negotiations the
applicant was asked to raise any dispute. He only drew the
municipality’s attention to s38A (a) sometime later.
[13]
He submitted further that the municipality negotiated in private and
confidentially and was indirectly generous towards the
applicant
because the applicant was not entitled to the R400 000 it paid him.
This, he submitted indicated that the applicant was
given
preferential treatment above other employees.
[14]
He conceded that during the negotiations there was no discussion or
mention of the pension benefits of the applicant. In other
words the
applicant was silent on the pension benefits. Although, as he
correctly conceded, it seems that the municipality was
not aware of
s38A until the applicant drew its attention thereto.
[15]
Three interwoven issues arise in this matter:(i)Whether the parties
concluded an oral agreement which was reduced to writing,(ii)
whether
the parties reached a settlement agreement asserted by the
municipality and flowing from that (iii) whether such settlement
agreement compromised the applicant’s rights under s38A.
[16]
As set out above section 38A is clear and unambiguous. Thus need no
other interpretation. The municipality conceded that much
when it
stated unequivocally in para 9 of its opposing affidavit that ‘I
admit that the first respondent is bound to the
rules of the
applicable pension fund.’
[17]
A settlement agreement is subject to the common law principles of
contract.
[3]
The onus is on the
party that alleges a compromise has been reached.
[4]
A compromise (
transactio
)
is a contract which has as its object the prevention, avoidance or
termination of a dispute or litigation.
[5]
The municipality could not nail its colours to the mast as to what
dispute or litigation the parties intended to settle because
there
was never any dispute. The municipality made an offer to retrench the
applicant before his retirement age for operational
reasons and he
accepted. In
Goldblatt
v Fremantle
[6]
the
court stated
:
‘
Where
parties have agreed that their contract shall be in writing there
will be no binding obligation between them until the terms
have been
reduced to writing and signed.
Where therefore a plaintiff and a
defendant expressly agreed that an arrangement made between them
verbally with regard to the supply
of certain lucerne should be
reduced to writing by defendant and confirmed in writing by
plaintiff, and plaintiff failed so to
confirm the arrangement.
Held,
that there was no contract,
in the absence of proof of any new agreement or of a waiver by
defendant of the original stipulation.’
[18]
The fact that the
municipality did not append the written agreement on which it relied
initially is untenable for the simple reason
that the agreement
referred to is not appended to the papers. The municipality has
provided no reason why such agreement was not
appended to the papers.
Instead it attempted to side step this by alleging reference to an
audio recording of the outline of the
discussion which took place
between the applicant and the municipality’s management
including the Municipal Manager on 22
September 2014. As Mr Steenkamp
correctly conceded, that audio recording made no reference to s38A
and the rights flowing from
it or that the applicant waived his
rights in terms of the section
in
lieu
of
some payment. What the audio recording specifically referred to at
page 22 was (i) severance package as per SALGBC Collective
Agreement,
(ii) one month notice pay (iii) accumulated leave pay and (iv) pro
rata bonus.
[19]
The municipality instead attempted to sneak in a proposition that the
applicant was paid R400 000 more than what he was entitled
to. Yet as
is clear from all the communication between the parties, at no stage
did it state that the R400 000 was
in
lieu
of
the applicant’s pension benefits. There is no basis upon which
the applicant could have waived such important rights. Rights
which
are enshrined in a statute and cannot in any way be contracted out
of. This proposition is simply untenable in law. What
is seriously
disturbing is that such proposition is made under oath by people who
hold the most senior positions in the municipality,
a municipal
manager and a Chief Financial Officer. Two officers who are directly
responsible for the management of the finances
of the municipality.
It is totally unacceptable.
[20]
Section 38(A) binds the municipality, as it correctly admitted in its
opposing affidavit. This statutory provision that binds
the
municipality to the extent that it is not open to the parties to
contract out of it. Secondly, although this was not raised
as a
separate issue, s38A creates a tripartite obligation i.e. vis-a-vis
the applicant and his employer; the employer vis-à-vis
the
pension fund and the pension fund vis-a-vis applicant. The Fund was
not even consulted or engaged on this provision and the
implication
of contracting out of it.
[21]
Apart from the fact that the municipality blew hot and cold on
whether there was a written agreement between it and the applicant
and whether there was an oral agreement reduced into writing, it is
clear that there was never a written agreement between the
parties
settling the pension benefits as claimed by the municipality. There
was never a settlement agreement concluded between
the applicant and
the municipality nor did such purported agreement amount to a
compromise of the applicant’s rights to his
pension benefits.
On the simple reading of s38A, it could not be. If, for unknown
reasons, it could be interpreted that way, such
interpretation would
be contrary to s4 of the Basic Conditions of Employment Act
[7]
which expressly incorporates this basic condition of employment in
the contracts of employees. On the other hand such interpretation
would be contrary to public policy, because an employee cannot waive
statutory rights.
[22]
In the result, the following order is granted.
ORDER
‘
1.The
application succeeds.
2.
The respondent to pay the costs of this application on party and
party scale.’
________________
B.
C. MOCUMIE, J
For
the applicant:
Adv WA Van Aswegen.
Instructed
by:
Peyper Attorneys
BLOEMFONTEIN
For
the respondent:
Adv MDJ Steenkamp.
Instructed
by:
Matsepe Inc
BLOEMFONTEIN
[1]
See pages 28 to 29 of the paginated papers.
[2]
Van Tonder v Western Credit Ltd
1966 (1) SA 189
(C) at 195 C – D, see also
Simmonds
v White and another
1980
(1) SA 755
C.
[3]
Blou Bul Boukontrakteurs v
McLachlan
1991(4) SA 283
(T).
[4]
Chapmans Peak Hotel (Pty) Ltd v
South Peninsula Municipality
[1998] 4 All SA 619 (C).
[5]
Gollach & Gomperts (1967)
(Pty) Ltd v Universal Mills & Produce Co (Pty) Ltd
1978 (1) SA 914
(A) at
921;
Karson v Minister of
Public Works
1996 (1) SA
887
(E) at 893 see also Myflor Investments (PTY)
Ltd
v Everett No and others 2001 (2) SA 1083 (C).
[6]
Unreported, South Gauteng High Court,
case number 12398/2005 (delivered 11 February 2011).
[7]
Basic Conditions of Employment Act 75 of 1997
.