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[2019] ZASCA 185
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M N v F N (714/2018) [2019] ZASCA 185; 2020 (2) SA 410 (SCA) (3 December 2019)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No: 714/2018
In
the matter between
M
N
APPELLANT
and
F
N
RESPONDENT
Neutral
citation:
M N v F
N
(714/2018)
[2019] ZASCA
185
(3 December 2019)
Coram:
Petse DP, Leach, Swain and
Mbatha JJA and Dolamo AJA
Heard
:
26 November 2019
Delivered:
3 December 2019
Summary:
Divorce
Act 70 of 1979
–
ss 7(7)
and (8)
(a)
– Pension Funds Act 24 of 1956 (PFA) – reference to
‘pension fund’ in
Divorce Act – means
‘pension
fund organisation’ in PFA – object of providing annuities
in a pension fund or lump sum payments in
a provident fund –
reference in court order to right and interest in named pension
fund – includes right and
interest in pension and provident
fund sections of Fund.
Order
On
appeal from:
Limpopo
Division of the High Court, Polokwane (Makgoba JP and Semenya J
sitting as court of appeal):
1 The appeal succeeds with costs
excluding the costs incurred by the appellant at the hearing on 12
September 2019.
2 The order of the court a quo is set
aside and replaced with the following order:
‘
The appeal
succeeds with costs and the order of the regional court Polokwane, is
set aside and replaced with the following order
of this court:
(a) It is declared
that the order of the North Eastern Divorce Court issued on 6
December 2004,
that
50 per cent of the
respondent’s right and interest in the University of the North
Pension Fund be paid to the appellant, includes
the respondent’s
right and interest in the pension fund section, as well as the
provident fund section, of the University
of Limpopo Retirement Fund.
(b) The respondent is ordered to pay
the costs of the application.’
JUDGMENT
Swain JA (Petse DP, Leach and
Mbatha JJA and Dolamo AJA concurring):
[1] The origin of the present dispute
lies in the terms of an order of divorce granted as long ago as 6
December 2004, by the North
Eastern Divorce Court, (the Divorce
Court) in which the bonds of marriage between the appellant, Mrs M N
and the respondent, Mr
F N, were dissolved. That portion of the order
whose proper interpretation is placed in issue, reads as follows:
‘
That
the joint estate shall be divided and 50% of the plaintiff’s
right and interest in the University of the North Pension
Fund when
it becomes due and payable to plaintiff be made out to defendant,
calculated to date of this order.’
[2]
The order was granted in terms of a settlement agreement between the
parties and in accordance with the provisions of s 7(8)
(a)
of the Divorce Act 70 of 1979 (the
Divorce Act). This
section
provides that the court granting a decree of divorce in respect of a
member of a pension fund, may make an order that any
part of the
pension interest of that member which, by virtue of s (7), is due or
assigned to the other party to the divorce action,
shall be paid by
that fund to the other party, when any pension benefits accrue in
respect of that member.
[3] At the time the order was granted,
payment of a pension interest to the non-member spouse, depended upon
the rules of the particular
fund. This usually occurred when the
member spouse retired, was dismissed or when some other defined ‘exit
event’,
arose. As pointed out by the Constitutional Court in
Wiese v Government Employees Pension Fund & others
[2012]
ZACC 5
;
2012 (6) BCLR 599
(CC) para 6:
‘
The
problem was that a non-member spouse would be severely prejudiced if
the value of his or her benefit was frozen at the date
of divorce and
the beneficiary would have had to wait for a later exit event.’
The
Constitutional Court also noted that in order to cure this defect,
various amendments were made to the Pension Funds Act 24
of 1956 (the
PFA) which introduced the ‘clean-break’ principle. In the
result s 37D(4)
(a)
of the PFA provides that for the purposes of
s 7(8)
(a)
of the
Divorce Act, the
portion of the pension interest assigned to
the non-member spouse in terms of a decree of divorce, is deemed to
accrue to the member
on the date on which the decree of divorce is
granted. The object of this amendment to the PFA was to ensure that
the non-member
spouse, receives payment of the amount assigned from
the member’s pension interest, in terms of a decree of divorce
and within
the statutorily defined periods, as set out in
s 37D(4)
(b)
of the PFA.
[4]
In order to render the provisions of
ss 37D(4)
(a)
and
37D
(4)
(b)
of the PFA applicable to divorce orders,
or
decrees for the dissolution of customary marriages, granted
prior to 13 September 2007, in which any portion of the pension
interest was assigned to the non-member spouse,
s 37D(4)
(d)
of the PFA provides as follows:
‘
Any
portion of the pension interest assigned to the non-member spouse in
terms of a decree of divorce or decree for the dissolution
of a
customary marriage granted prior to 13 September 2007 are for
purposes of any law other than the Income Tax Act, 1962, including,
but not limited to,
section 7(8)
(a)
of the
Divorce Act, 1979
, deemed to have accrued to the member on 13
September 2007 and must be paid or transferred in accordance with
paragraphs
(a)
and
(b)
.’
[5]
Because the decree of divorce was granted on 6 December 2004, the
portion of the pension interest of the respondent, assigned
to the
appellant as the non-member spouse in terms of the order, was deemed
to have accrued to the appellant on 13 September 2007
and had to be
paid in accordance with
ss 37D(4)
(a)
and
37D
(4)
(b)
of the PFA. The appellant therefore lodged a claim with Alexander
Forbes Financial Services, the administrator of the
University of the
North Pension Fund, whose name in the interim had been changed to the
University of Limpopo Retirement Fund (the
Fund), for payment of the
amount owed to her, in terms of the court order.
[6] The response of Alexander Forbes
Financial Services (the fund administrator), to the claim of the
appellant, by way of a letter
dated 29 September 2011, was as
follows:
‘
We
refer to the Final Order of Divorce dated 6 December 2004 in the
Divorce Court of South Africa and confirm as follows:
We
have calculated the divorce benefit due to you in terms of the Final
Divorce Order in accordance with
Section 7(8)
(a)
(ii) of the
Divorce Act as
read with
Section 37D
of the
Pension Funds Act. The
value of the pension interest (the benefit which your ex-spouse (“the
member”) would have been entitled to in terms
of the Rules of
the Fund) on the date of divorce is R167 656.53.
In
terms of the final divorce order, you are entitled to 50% of your
ex-spouse’s pension interest in the Fund. The amount
of R83
828.27 is due and payable to you in terms of the final divorce order
(Plaintiff) and this amount less tax plus fund return
(where
applicable) has been paid by means of an electronic bank transfer on
26/09/2011 into your bank account as provided by you.’
It
was then added, that the payment was made in full and final
settlement of any amounts owed to the appellant, by the Fund.
[7]
The attorneys for the appellant replied stating that the amount
tendered was not accepted in ‘full and final settlement
of any
amounts owed by the fund in terms of the divorce order.’ It was
added that the appellant’s instructions were
that she had been
advised by the fund administrator that they were awaiting
confirmation from the respondent, ‘as to whether
payment should
be effected from his Provident- or retirement fund or from both
funds’. It was then added that ‘our
client is legally
entitled to 50% of your members pension interest in the University of
the North/Limpopo’s pension/provident
fund(s)’.
[8] The response of the fund
administrator was that the appellant was only paid from the pension
fund section, because;
‘
The
court order clearly states that we should pay from the pension fund
section only, should the parties [have] intended for the
payment to
be deducted from the pension fund and provident fund section the
court order should have clearly stated that the defendant
(Mrs. N) is
entitled to a portion from the pension and provident fund section.
The payment to Mrs N was calculated according to
what the court order
stated.’
[9] The appellant therefore instituted
application proceedings in the regional court, Polokwane, for an
order varying the order
granted by the Divorce Court, to read as
follows:
‘
50%
of the Plaintiff’s rights and interest in the University of
Limpopo Retirement Fund, (Pension and Provident Section),
be paid out
to the Defendant, calculated as on date of divorce, and that an
endorsement of this order be effected in the records
of the
University of Limpopo Retirement Fund, (Pension and Provident
Section), and that the University of Limpopo Retirement Fund,
(Pension and Provident Section), be ordered to effect such payment to
the Defendant as on date of divorce, in terms of
section 7(7)
read
with (8) of the
Divorce Act 70 of 1979
.’
[10]
For reasons that will become apparent, the relief sought was
erroneous and unnecessary because the order granted did not require
variation to make its meaning clear. Properly construed, in the
context of the
Divorce Act and
the PFA, the fund administrators were
obliged to make payment from both the provident and pension sections
of the Fund. The appellant
should rather have sought a declaratory
order as to the meaning of the order, combined with an order
directing the fund administrator
to make payment to her, in
accordance with its terms.
[11]
In the result, the appellant embarked upon a long and no doubt
costly, legal battle to vindicate her right to payment from
both the
pension and provident sections of the Fund, in terms of the court
order. The application in the regional court was opposed
by the
respondent, on the basis that it was agreed between the parties that
50 per cent of his pension interest would accrue to
the appellant,
but it was never agreed that the appellant would have a share in his
provident fund. However, as correctly submitted
by the appellant, it
was common cause that neither on the date of divorce, nor the date of
enforcement of the order, was the respondent
a member of a provident
fund. He was a member of a pension/retirement fund which comprised
both a pension and provident section.
The respondent also submitted
that
ss 7(7)
and
7
(8) of the
Divorce Act only
dealt with a pension
benefit and not a provident fund. In addition, the definition of
‘pension fund’ in
s 1(1)
of the PFA, did not include a
provident fund.
[12]
On 14 November 2014 the regional court dismissed the application with
costs on the basis that the PFA provided separate definitions
for
‘pension preservation fund’ and ‘provident
preservation fund’, and as a consequence the one did not
include the other. In addition, it was held that the appellant had
not alleged that the Fund also incorporated a provident fund,
before
being renamed as the University of Limpopo Retirement Fund. The
regional court then concluded that, on the facts of the
case, the
order sought was not sanctioned by the
Divorce Act.
[13
]
Aggrieved at the outcome, the appellant unsuccessfully appealed to
the Limpopo Division of the High Court, Polokwane (Makgoba
JP and
Semenya J). The appeal was opposed by the respondent on three
grounds. First, the appeal was lodged out of time. Second,
the appeal
was deemed to have lapsed because the appellant had failed to
prosecute it within the prescribed period provided for
in rule 50(1)
of the Uniform Rules of Court, read with rule 51(9) of the
Magistrates’ Courts Rules. Third, the appeal did
not have
merit. The court a quo upheld in limine, the first two points and
then noted that the appeal ‘ought to be struck
from the roll’.
However, it then went on to find that the ‘application for
condonation for the late noting and prosecution
of the appeal would
have been a futile exercise in that such application would not have
been entertained in isolation. The appeal
court would still have to
determine whether, on the merits, the appeal would have reasonable
prospects of success’.
[14]
The court a quo then proceeded to deal with the merits of the appeal.
The appellant submitted that the court should place more
emphasis on
the words ‘Pension Fund’ in construing the court order,
because there was only one fund and the order stated
that the
appellant was entitled to 50 per cent of the respondent’s
rights in the pension interest of the respondent, in that
fund. The
administrator of the fund was therefore bound to make payment from
the Pension Fund which, by definition, encompassed
the Provident Fund
as well. This argument was rejected simply on the basis that the
order was
perfecta
and could not be varied. The Divorce Court had ordered the Fund to
pay as per the parties’ settlement agreement and it was
not
suggested that the order was granted by mistake.
[15]
Having concluded that the appeal failed on the merits, the court a
quo added that, because the respondent had ‘been dragged
to
court, 18 years after the final order was made’, the appellant
should be ordered, ‘to pay punitive costs of seeking
to
prosecute a lapsed appeal’, as a mark of its displeasure. The
appeal was then dismissed with costs on the attorney and
client
scale. Special leave to appeal was thereafter granted by this court.
[16] At the hearing of the appeal,
counsel for the respondent submitted that the order granted by the
Divorce Court had to be interpreted
in the context of the settlement
agreement, concluded between the parties. In this regard, reliance
was placed upon the following
passage in the opposing affidavit of
the respondent, the contents of which were admitted by the appellant
in reply:
‘
That
the decree of divorce, annexure “MJN4” to the Founding
Affidavit, was granted as a result of the agreement between
myself
and the applicant, in which we agreed that 50% of my pension interest
would accrue to the applicant. We did not agree that
the applicant
would have a share in my Provident Fund. The applicant is therefore
not allowed to vary an order which was granted
with her agreement, to
now incorporate aspects that were not agreed on when the matter was
finalised in 2004.’
[17]
However, these averments were made in reply to the following
averments made by the appellant, in her founding affidavit:
‘
On
the date of the divorce the Respondent and I inter alia agreed to an
order in terms whereof I would be entitled to 50% of his
pension
interest in the University of the North Pension Fund. The Honourable
Court is respectfully referred to the final decree
of divorce
attached hereto and marked annexure “MJN4”.’
[18]
In this regard the appellant correctly submitted that the divorce
order did not state that the appellant was entitled to 50
per cent of
the respondent’s pension interest in the ‘pension fund
section’, but that she was entitled to 50
per cent of the
respondent’s pension interest in the University of the North
Pension Fund. Neither at the date of the divorce,
nor the date of
enforcement of the divorce order, was the respondent a member of a
provident fund. The respondent was a member
of the University of the
North Pension Fund, which at all relevant times was the one and only
fund, albeit that its name was subsequently
changed to the University
of Limpopo Retirement Fund.
[19]
From the outset, the case of the respondent was that the order of the
Divorce Court correctly recorded the agreement of the
parties and
that the appellant was not allowed to vary its terms, to include
terms that were not agreed upon. At no stage did the
respondent seek
any variation of the order, to reflect what the respondent maintained
was the true agreement between the parties.
It is quite clear that
the reliance by the respondent on the fact that the parties never
agreed that the appellant, ‘would
have a share in my Provident
Fund’, amounted to no more than an opportunistic reliance by
the respondent on the erroneous
interpretation placed on the order by
the fund administrator.
[20]
As pointed out above, and for the reasons that follow, no variation
of the order of the divorce court was necessary because
the reference
to ‘the plaintiff’s right and interest in the University
of the North Pension Fund’ included not
only his right and
interest in the pension fund, but also the provident fund. This is
because
s 7(8)
(a)
(i)
of the
Divorce Act, refers
to ‘any part of the pension interest
of that member’ in respect of which the court may make an order
that it be paid
to the non-member spouse.
[21] ‘Pension Interest’ in
turn, is defined in the
Divorce Act, as
follows:
‘
Pension
interest
’,
in relation to a party to a divorce action who –
(a)
is
a member of a
pension
fund
(excluding a retirement annuity fund), means the benefits to which
that party as such a member would have been entitled in terms
of the
rules of that fund if his membership of the fund would have been
terminated on the date of the divorce on account of his
resignation
from his office.’ (Emphasis added.)
[22] ‘[P]ension [F]und’ is
defined in the
Divorce Act as
follows:
‘
.
. . means a pension fund as defined in
section 1(1)
of the
Pension
Funds Act, 1956
, irrespective of whether the provisions of that Act
apply to the pension fund or not.’
The PFA must then be consulted to
ascertain the meaning of ‘pension fund’, which in turn is
defined as follows:
‘
[P]ension
fund
means a pension fund organisation.’
‘
[P]ension
fund organisation’, is then defined in the PFA as follows:
‘
(a)
any association of persons established
with
the object of providing annuities or lump sum payments
for members or former members of such association upon their reaching
retirement dates, or for the dependants of such members or
former
members upon the death of such members.’ (Emphasis
added.)
[23] As correctly pointed out by A B
Downie
Essentials of Retirement Fund Management
, (2019) para
C2 at 12:
‘
It
is important to note that the differences between pension and
provident funds do not stem from the
Pension Funds Act which
does not
distinguish between the two types of fund. The
Pension Funds Act
treats
both pension and provident funds the same under the
description of a “pension fund organization” covered
earlier in
this chapter. The differences between pension funds and
provident funds mentioned in this chapter, stem from the
Income
Tax
Act.’
[24]
In terms of the Income Tax Act 58 of 1962, the main difference
between a pension fund and a provident fund, is as follows:
In a
pension fund, the member is required to purchase an annuity with at
least two-thirds of the final benefit and is restricted
to taking one
third of the final benefit, as a lump-sum cash payment. However, in a
provident fund, the member may take the full
amount of the final
benefit as a lump-sum cash payment. Consequently, the reference in
the definition of a ‘pension fund
organisation’ in the
PFA, to the object of ‘providing annuities or lump sum
payments’, includes both pension
funds and provident funds.
[25]
It is therefore clear that the reference to a ‘pension fund’
in the
Divorce Act, means
a ‘pension fund organisation’
in the PFA, which in turn includes both pension and provident funds.
Consequently, properly
interpreted, the reference in the court order
to ‘. . . 50% of the plaintiff’s right and interest in
the University
of the North Pension Fund’ (now the University
of Limpopo Retirement Fund), includes both the pension fund section,
as well
as the provident fund section, of the University of Limpopo
Retirement Fund.
[26]
Consequently, the justice of the case required that the court a quo
uphold the appeal and substitute the order of the regional
court with
a declaratory order, in terms of the prayer for ‘Further and/or
alternative relief’ in the notice of motion,
declaring that the
order of the divorce court issued on 6 December 2004
that
50 per cent of the
respondent’s right and interest in the University of the North
Pension Fund be paid to the appellant, was
to include the
respondent’s right and interest in the pension fund section, as
well as the provident fund section, of the
University of Limpopo
Retirement Fund.
[27]
A remaining issue is that of the non-joinder of the fund
administrator, which was raised as a point in limine before the
regional
court. The regional court found that although the fund
administrator was an interested party, there was no application for
joinder
by either party and this was an insufficient reason to
dismiss the application. Before the court a quo, the issue was again
raised.
The court a quo found that the respondent was correct in
submitting that the fund administrator ought to have been joined, but
concluded that the appeal should in any event be dismissed on the
merits. However, at the hearing of the appeal counsel for the
appellant, by consent, handed up a letter in which the fund
administrator stated that it abided the decision of this court and
consequently waived any right to be joined in the proceedings.
[28] Nevertheless, it is necessary to
point out that in
Old Mutual Life Assurance Co (SA) Ltd &
another v Swemmer
2004 (5) SA 373
(SCA) para 26, it was stated
that deeds of settlement and divorce orders relating to pension
interests, should be carefully formulated
in order to ensure that
they fall within the ambit of
ss 7(7)
and
7
(8) of the
Divorce Act,
because
:
‘
If
this is done, then all that would be required of the pension fund in
question is to perform administrative functions to give
effect to the
order, without the rights of the fund or the relationship between the
fund and the member spouse being affected in
any way, and it would
not be necessary to join the fund as a party to the divorce
proceedings.’
In
the present case, the order was formulated in accordance with the
provisions of these sections of the
Divorce Act and
properly
construed only required the fund administrator and the Fund, to
perform administrative functions, to give effect to it.
Consequently,
it was unnecessary for either of these entities to be joined, as a
party to the proceedings.
[29]
As regards the issue of costs, the appeal was originally set down for
hearing on 12 September 2019, but could not be finalised
in the
absence of the respondent as the new attorneys of the respondent had
not been furnished with the notice of set down of the
appeal, by the
registrar of this court. Consequently, the order of costs in favour
of the appellant will exclude the costs of the
abortive appeal
hearing.
[30] I grant the following order:
1 The appeal succeeds with costs
excluding the costs incurred by the appellant the hearing on 12
September 2019.
2 The order of the court a quo is set
aside and replaced with the following order:
‘
The appeal
succeeds with costs and the order of the regional court Polokwane, is
set aside and replaced with the following order
of this court:
(a) It is declared
that the order of the North Eastern Divorce Court issued on 6
December 2004,
that
50 per cent of the
respondent’s right and interest in the University of the North
Pension Fund be paid to the appellant, includes
the respondent’s
right and interest in the pension fund section, as well as the
provident fund section, of the University
of Limpopo Retirement Fund.
(b) The respondent is ordered to pay
the costs of the application.’
_________________________
K
G B Swain
Judge
of Appeal
Appearances:
For
the Appellant:
M L Haskins SC
Instructed by:
DDKK Inc.
Attorneys, Polokwane
Phatshoane Henney
Attorneys, Bloemfontein
For
the Respondent:
L Grobler
Instructed by:
Koor Attorneys,
Johannesburg
Rampai Attorneys,
Bloemfontein