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[2011] ZAECMHC 22
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Titi v Funds at Work Umbrella Provident Fund (1728/2010) [2011] ZAECMHC 22 (10 March 2011)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE DIVISION, MTHATHA
Case no: 1728/2010
Date Heard:22/02/2011
Date Delivered:
In
the matter between:
BABALWA
RUTH TITI
…................................................
APPLICANT
Versus
FUNDS
AT WORK UMBRELLA PROVIDENT
FUND
….....................................................................
RESPONDENT
JUDGMENT
SMITH
J:
[1] This matter concerns the
validity of the respondent's decision to allocate pension fund
benefits due to the applicant’s
brother contrary to his written
instructions.
[2] The applicant’s brother,
Nceba Titi,
was a member of the respondent pursuant to his
employment at Fortgale Motors, Mthatha. The respondent is a provident
fund, established
in terms of the provisions of the Pension Funds
Act, 24 of 1956 (hereinafter the “Act”)
[3] It is common cause that on 13
February 2009
Nceba Titi
completed a “
BENEFICIARY
NOMINATION FORM
” wherein he nominated the applicant and his
two children, being a son and a daughter, as his beneficiaries of his
fund benefits
upon his death. He did not stipulate the proportions in
which the funds were to be divided between the nominated
beneficiaries.
[4] The nomination form furthermore
contained the following qualification:
“
Important
note:
Section
37 C of the
Pension Funds Act governs
the distribution and payment of
benefits on a member’s death. You may nominate any person to
receive any part of the benefit
payable; however, the board of
trustees have a duty in terms of the Act to apportion benefits
equitably between your beneficiary
at their discretion
. Your
nomination will serve to assist the board of trustees in making these
decisions.”
[5]
Nceba
Titi
died on 13 September
2009. During March 2010 the respondent's board of trustees, without
prior notice to the applicant, allocated
an amount of R61 589. 50,
which represented the benefits in the latter's fund, in the following
proportions:
Yanga Qina
(minor son) 39%:
R24 020.02
Esinako Qina
(minor daughter)
61%: R37 569. 78.
[6] The board of trustees resolved
not to make any allocation to the applicant, “
as there is no
evidence that she was dependent on the deceased and the benefit is
too small to make a reasonable allocation.”
[7] In making the above-mentioned
allocation the board purportedly acted in terms of s. 37 C of the
Act. That section reads as follows:
“
37C
Disposition of pension benefits upon death of
member
(1)
Notwithstanding anything to the contrary contained in any law or in
the rules of a registered fund, any benefit (other than
a benefit
payable as a pension to the spouse or child of the member in terms of
the rules of a registered fund, which must be dealt
with in terms of
such rules) payable by such a fund upon the death of a member, shall,
subject to a pledge in accordance with section
19 (5)
(b)
(i)
and subject to the provisions of sections 37A (3) and 37D, not form
part of the assets in the estate of such a member, but shall
be dealt
with in the following manner:
(a)
If the fund within twelve months of the death of the member becomes
aware of or traces a dependant or dependants
of the member, the
benefit shall be paid to such dependant or, as may be deemed
equitable by the board, to one of such dependants
or in proportions
to some of or all such dependants.
[Para.
(a)
substituted by s. 5
(a)
of Act 22 of 1996.]
(b)
If the fund does not become aware of or cannot trace any dependant of
the member within twelve months of the
death of the member, and the
member has designated in writing to the fund a nominee who is not a
dependant of the member, to receive
the benefit or such portion of
the benefit as is specified by the member in writing to the fund, the
benefit or such portion of
the benefit shall be paid to such nominee:
Provided that where the aggregate amount of the debts in the estate
of the member exceeds
the aggregate amount of the assets in his
estate, so much of the benefit as is equal to the difference between
such aggregate amount
of debts and such aggregate amount of assets
shall be paid into the estate and the balance of such benefit or the
balance of such
portion of the benefit as specified by the member in
writing to the fund shall be paid to the nominee.
[Para.
(b)
substituted by s. 21 of Act 54 of 1989.]
(b
A) If
a member has a dependant and the member has also designated in
writing to the fund a nominee to receive the benefit
or such portion
of the benefit as is specified by the member in writing to the fund,
the fund shall within twelve months of the
death of such member pay
the benefit or such portion thereof to such dependant or nominee in
such proportions as the board may
deem equitable: Provided that this
paragraph shall only apply to the designation of a nominee made on or
after 30 June 1989: Provided
further that, in respect of a
designation made on or after the said date, this paragraph shall not
prohibit a fund from paying
the benefit, either to a dependant or
nominee contemplated in this paragraph or, if there is more than one
such dependant or nominee,
in proportions to any or all of those
dependants and nominees.
[Para.
(b
A
)
inserted by s. 6
(a)
of Act 51 of 1988 and substituted by
s. 21 of Act 54 of 1989 and by s. 5
(b)
of Act 22 of 1996.]
(c)
If
the fund does not become aware of or cannot trace any dependant of
the member within twelve months of the death of the member
and if the
member has not designated a nominee or if the member has designated a
nominee to receive a portion of the benefit in
writing to the fund,
the benefit or the remaining portion of the benefit after payment to
the designated nominee, shall be paid
into the estate of the member
or, if no inventory in respect of the member has been received by the
Master of the Supreme Court
in terms of
section
9
of
the Estates Act, 1965 (
Act
66 of 1965
),
into the Guardian's Fund.
[8] The applicant contended that the
decision of the board of trustees was subject to judicial scrutiny
and reviewable in terms
of the provisions of the Promotion of
Administrative Justice Act no. 3 of 2000 (hereinafter “PAJA”),
on the following
grounds:
The decision was taken unilaterally
and without giving her notice or affording her a hearing;
(ii) The nomination by
Nceba Titi
was effectively a
stipulatio alteri
in her favour which she
had accepted. The respondent's board of trustees was therefore not at
liberty to depart from his written
instructions.
[9] At the hearing of the matter
however,
Mr Noxaka,
who appeared for the applicant, stated
that he relied only on the
audi alteram partem
argument and
elected, for the purposes of this application, not to persist with
the
stipulatio alteri
argument. He submitted therefore that
the impugned decision should be set aside and the matter referred
back to the respondent's
board of trustees with directions to afford
the applicant a proper hearing.
[10]
Mr Noxaka
furthermore
submitted that the decision of the respondent fell within the ambit
of the definition of "
administrative action
" in
terms of PAJA. Section 1 defines
"administrative action
"
as:
‘
Any
decision taken or failure to take a decision by -
a
natural or juristic person, other than an organ of state, when
exercising a public power or performing a public function in
terms
of empowering provision, which adversely affects the rights of any
person and which has a direct external legal effect…”
[11]
Mr Noxaka
submitted that
the source of the respondent’s powers, when deciding whether or
not to override the explicit stipulations
of members, derives solely
from the provisions of s. 37C of the Act. Therefore, being an entity
established in terms of the provisions
of the Act, it is exercising a
public function when administrating the funds of its members.
[12]
Mr Noxaka
relied for his
submission in this regard on the unreported decision of
Cebisa
Kalimashe v Eskom Pension and Provident Fund
(Case no 561/08
Mthatha High Court), where Nhlangulela J found that the Eskom Pension
and Provident Fund exercises a public function
"
as the
administrator of insurance policies given by the insurer in lieu of
the invested fund serves to protect its members by ensuring
that the
fund is operated in the best interest of members, including ensuring
that payment of insurance contributions by Eskom
is regular".
[13]
Mr Hobbs,
who appeared
for the respondent, submitted that that matter is distinguishable on
the basis that the learned Judge had found that
Eskom is a public
company which performs a public function, namely the supply of
electricity throughout the Republic.
[14] While I agree with
Mr Hobbs
that the issue was somewhat more straightforward in that case, I am
nevertheless of the view that the respondent, when acting in
terms of
the provisions of the Act and administering the funds on behalf of
its members, is exercising a public power. The decisions
which it is
empowered to take in terms of s. 37C of the Act, and in particular
the power to effectively override the express wishes
of its members,
may conceivably affect members of the public. Any decision made in
pursuance thereof and which could negatively
impact on members of the
public would therefore be subject to judicial scrutiny and review in
terms of the provisions PAJA. The
applicant was therefore entitled to
fair administrative action and more particularly, in terms of s.
3(2)(b) of PAJA, entitled
to:
“
(i)
Adequate notice of the nature and purpose of the proposed
administrative action; and
(ii)
a reasonable opportunity to make representations.”
[15] This argument is however a
double edged sword.
Mr Hobbs
has, in my view, correctly argued
that if PAJA is of application then the whole of that act and not
only selected provisions thereof
must be applied. He referred in
particular to s. 7(2)(a) and (b) thereof which provide as follows:
“
(a)
Subject to paragraph (c) no court or tribunal shall review an
administrative action in terms of this Act unless any internal
remedy
provided for any other law has first been exhausted.
Subject
to paragraph (c), a court or tribunal must, if it is not satisfied
that any internal remedy referred to in paragraph (a)
has been
exhausted, direct that the person concerned must first exhaust such
remedy before instituting proceedings in a court
or tribunal for
judicial review in terms of this Act.”
[16]
Mr Hobbs
has also
correctly pointed to the fact that there is no application for
condonation of the failure to exhaust internal remedies
in terms of
the provisions of s. 7(2)(c) of PAJA.
[17] It is indeed so that the Act
provides comprehensively for internal remedies for an aggrieved
person. Section 30A provides as
follows:
"(1)
Notwithstanding the rules of any fund, the complainant may lodge a
written complaint with the fund for consideration by
the board of the
fund.
(2)
A complaint so lodged shall be properly considered and replied to in
writing by the fund or the employer who participates in
a fund within
30 days after receipt thereof.”
[18] If the complainant is not
satisfied with the reply, it may refer the matter to an adjudicator
who is appointed in terms of
s. 30C of the Act. The adjudicator has
comprehensive powers to deal with complaints serving before him or
her and in terms of s.
30D is enjoined to dispose of such complaints
in a procedurally fair, economical and expeditious manner.
[19] Section 30E provides that
“
(1)
In order to achieve his or her main object, the adjudicator-
(a)
Shall, subject to paragraph (b), investigate any complaint and may
make the order which any court of law may make.”
[20] The applicant has not made any
attempt to place before the court exceptional circumstances which
prevented her from pursuing
these effective internal remedies. She
has also not applied for condonation in terms of PAJA. The statutory
remedies which are
available to the applicant provide for complaints
and appeals to be adjudicated and finalized by the relevant
functionaries within
a reasonable time and in a fair and transparent
manner. There can be no conceivable justification for the applicant's
failure to
pursue these remedies before applying for judicial review.
[21] For these reasons I am
satisfied that this is an appropriate case where the applicant should
be directed to first exhaust these
internal remedies before
instituting proceedings in a court for judicial review.
[22]
Mr Hobbs
has also argued
that the applicant should be ordered to pay costs on an attorney and
client scale. His submissions in this regard
were based on
correspondence which the respondent’s attorneys have addressed
to the applicant’s attorneys wherein they
have drawn the
attention of the latter to the remedies provided for in the Act. They
also suggested that the matter be withdrawn
with no order as to costs
and that it be referred for adjudication to the Pension Funds
Adjudicator in terms of s. 30A of the Act.
The applicant’s
attorneys’ rejection of this proposal appears to have been
based on the assertion that her nomination
as beneficiary was in
effect a
stipulatio alteri
which had been accepted by her and
that the respondent’s Board of Trustees was therefore
constrained to act in accordance
therewith. They also appeared to
have been of the view that because no legal representation was
allowed if the matter is referred
to the Pension Fund Adjudicator,
the applicant would have been unduly prejudiced.
[23]
Mr Hobbs
submitted that
in the light of the fact that the applicant had persisted with the
application despite the invitation by the respondent
to settle the
matter, she should be mulcted with attorney and client costs.
[24] It is trite law that an order
for cost on an attorney and client scale is a punitive one and should
be awarded in exceptional
circumstances only. See in the regard
Sentrachem Ltd v Prinsloo
1997 (2) SA 1
(A).
In the matter of
Nel v Waterberg Landbouwers Ko-Operatiewe Vereeniging
1946 AD 597
Tindall JA said the following in this regard:
“
The
true explanation of awards of attorney and client cost not expressly
authorized by Statute seems to be that, by reason of special
considerations arising either from the circumstances which give rise
to the action or from the conduct of the losing party, the
court in a
particular case considers it just, by means of such an order, to
ensure more effectually than it can do by means of
a judgment for
party and party costs, that the successful party will not be out of
pocket in respect of the expenses caused to
him by the litigation.”
[25] The applicant was obviously
wrongly advised by her attorneys and the assertions of law on which
the decision was based to reject
the settlement proposals emanating
from the Respondent’s attorneys were obviously wrong. This does
however, in my view, not
justify the award of costs on an attorney
and client scale as a punitive measure. In any litigation before a
court of law one of
the litigants’ understanding of the law
will inevitably be declared by the court to have been wrong. The fact
that this may
have been brought to the attention of the litigant by
his successful opponent at an earlier stage of the proceedings and
that the
former had elected to proceed notwithstanding such
notification, does in my view not justify the losing party to be
mulcted with
attorney and client costs. See in this regard
Van Wyk
v Millington
1941 SA 1205
(C); Silverstream Investments (Kranskop) CC
v Ronbo Automotive CC
1997 (1) SA 107
(D).
[26] On the facts before me I am
unable to conclude that the applicant was not
bona fide
in
bringing the application or that the proceedings are vexatious or an
abuse of the legal process. For these reasons I am of the
view that
it is appropriate for costs to be awarded on a party and party scale.
[27] In the result I make the
following order:
(1) The application is dismissed
with costs;
The applicant is directed to first
exhaust the internal remedies provided for in the
Pension Funds Act,
no 24 of 1956
, before instituting proceedings in a court of law for
judicial review in terms of the provisions of the Promotion of
Administrative
Justice Act, no 3 of 2000.
_______________________
J.
E SMITH
JUDGE
OF THE HIGH COURT
Appearance
Counsel
for the Applicant : Mr. Noxaka
Attorney
for the Applicant : A. F NOXAKA & CO
No
63 Ludidi Building
Madeira
Street
Mthatha
Ref:
AFN
Counsel
for the Respondent: Mr. Hobbs
Attorney
for the Respondent: KEITH SUTCLIFF & ASS.
C/o
HUGHS, CHISHOLM AIREY
No
14 Park Road
Mthatha
Tel:
047 5311 624/8
Ref:
Mr. R. M. Gormley/ns/M261
Date
of Hearing : 22 February 2011
Date
of Delivery : 10 March 2011