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[2017] ZACC 1
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Ekurhuleni Metropolitan Municipality v Germiston Municipal Retirement Fund (CCT226/15) [2017] ZACC 1; 2017 (6) BCLR 750 (CC) (17 January 2017)
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CONSTITUTIONAL
COURT OF SOUTH AFRICA
Case
CCT 226/15
In
the matter between:
EKURHULENI
METROPOLITAN
MUNICIPALITY
Applicant
and
GERMISTON
MUNICIPAL RETIREMENT
FUND
Respondent
Neutral
citation:
Ekurhuleni Metropolitan
Municipality v Germiston Municipal Retirement Fund
[2017]
ZACC 1
Coram:
Mogoeng CJ, Nkabinde ADCJ, Cameron J, Froneman J,
Jafta J, Khampepe J, Madlanga J, Mbha AJ, Musi AJ and Zondo J
Judgments:
Nkabinde ADCJ (majority): [1] to [46]
Jafta
J (minority): [47] to [72]
Heard
on:
16 August 2016
Decided
on:
17 January 2017
Summary:
Pension
—
Pension fund rule —
Jurisdiction — Reconsideration of interpretation of the pension
fund rule based on “new”
evidence — Can a
municipality’s constitutional obligations override its
liability in terms of the rule — Enforcement
of the rule —
Whether it offends public policy — Whether a Pension Fund Board
has a duty of good faith toward the Municipality
(employer) —
No rigid adherence to the requirements of
res
iudicata
ORDER
On
appeal from the High Court of South Africa Gauteng Division,
Pretoria:
1.
Leave
to appeal is granted.
2.
The
appeal is dismissed with costs including costs of two counsel.
JUDGMENT
NKABINDE
ADCJ (Mogoeng CJ, Cameron J, Froneman J, Khampepe J, Madlanga J, Mbha
AJ, Musi AJ and Zondo J concurring ):
Introduction
[1]
This case concerns a claim by the
respondent for payment by the applicant of a certain sum of money
plus interest on the basis that
the money is owed in terms of a
guarantee under the Pension Fund Rules (Fund Rules), when that
guarantee applied to the 2007-2008
and 2008-2009 financial years.
At their core the issues to be determined are: first, whether this
Court should, in light
of the “new” evidence sought to be
tendered, reconsider the interpretation of rule 10.8.1 of the Fund
Rules (rule)
when the previous claim on the same cause of action has
already been pronounced upon in previous litigation between the
parties;
second, if the applicant should avoid liability because of
its constitutional obligations, whether the respondent owed the
applicant
a duty of good faith when making investment decisions and
whether the enforcement of the rule regarding the 2007-2008 and
2008-2009
financial years would be contrary to public policy; and
third, whether the High Court erred in holding that the applicant is
barred
by the doctrine of issue estoppel in relation to the defences
raised, especially concerning payment of public funds by an organ
of
state.
[2]
The applicant seeks leave to appeal
the decision of the High Court of South Africa, Gauteng Division,
Pretoria (High Court)
[1]
allowing, with costs, an action by the respondent arising from the
parties’ contract in terms of the Fund Rules. The
rule in
question contains an investment guarantee that is triggered when the
respondent achieves less than 5.5% return on its investment.
[2]
The Supreme Court of Appeal (SCA) refused leave to appeal, hence this
application. The respondent opposes the application
and asks
that it be dismissed with costs.
Parties
[3]
The applicant, Ekurhuleni
Metropolitan Municipality (Municipality), is established in terms of
section 12 of the Local Government:
Municipal Structures Act.
[3]
It is an employer as defined in the Fund Rules.
[4]
The respondent, Germiston Municipal Retirement Fund (Fund), is a
pension fund registered in terms of the Pension Fund Act
(Act).
[5]
Background
facts
[4]
The Fund was established in 1924 and
was registered in terms of section 4 of the Act. It administers
the pension scheme for
its members – employees of the
Municipality. The Municipality pays pension contributions to
the Fund on behalf of its
employees and the Fund invests the
contributions to maximise returns on the investments for payment of a
better pension pay-out
to the members when they retire.
[5]
The guarantee in rule 10.8.1 reads
as follows:
“
If
the rate of interest earned on the total moneys (including any
uninvested moneys) of the fund during any financial year should
be
lower than five and one-half per cent (5.5%) the Council shall
contribute to the Fund such a sum as would increase, on being
added
to the interest actually earned, the rate of interest to five and
one-half per cent (5.5%) during such financial year.”
The
guarantee is triggered whenever the Fund achieves less than a 5.5%
return on its investments in any financial year. Its
purpose is
to ensure the well-being of the Fund and to provide a safety net for
the members of the Fund.
[6]
It bears mentioning that for the
financial year 2003-2004 the Fund instituted an action in the High
Court of South Africa, Gauteng
Local Division, Johannesburg
(Local Division),
[6]
for payment of the guaranteed contribution. The Local Division
and SCA
[7]
interpreted the rule in favour of the Fund and ordered the
Municipality to pay. In those proceedings the Municipality
denied
liability. It challenged the interpretation of the
rule. To this end it relied on various defences that were also
pleaded
in the alternatives. One related to the determination
of the interest rate that ought to be earned by the Fund before the
rule is triggered. The Municipality argued that one must look
at what was actually laid out by the Fund in order to determine
its
total moneys (book value approach). Alternatively, if it is
bound by the rule, it would pay only if the yield achieved
on the
actual value of the assets determined using a discounted cash flow
approach was less than 5.5% per annum compounded.
Further
alternatively, that it was not bound because the rule is inconsistent
with the Constitution.
[7]
After
Ekurhuleni
I
, rule 10.8.1 was not triggered by the
Fund until the 2007-2008 and 2008-2009 financial years, when the Fund
achieved less than
5.5% return on its investments. The
litigation in the High Court is a sequel to that shortfall.
High
Court litigation
[8]
When the guarantee was triggered for
the 2007-2008 and 2008-2009 financial years,
[8]
the Fund called on the participating employers, including the
Municipality, to pay the required guarantee in terms of the bargain
under the rule. There were no submissions before this Court to
suggest that any other participating Municipality took issue
with the
investment guarantee or objected to satisfying the short-fall
amount. The Fund then instituted an action in the
High Court
for the payment of over R70 million. The Municipality
defended the action and denied liability. It
raised several
defences, which are alternative to each other.
[9]
The Municipality challenged the
interpretation of the rule and asked the High Court to reconsider the
interpretation in
Ekurhuleni I
[9]
on the ground that “new” evidence, on the history of the
rule and the financial accounting records of the Fund over
the years,
had been uncovered. It argued that the evidence would result in
a different interpretation to that adopted in
Ekurhuleni
I
. In its pleadings, the
Municipality asserted that the interpretation contended for by the
Fund violated section 152(1)
of
the Constitution
[10]
– to provide democratic and accountable government, ensure
provision of service delivery for local communities in a sustainable
manner and promote social and economic development.
[10]
It contended further that the
interpretation violates section 153 of the Constitution
[11]
because, in years where the guarantee is activated, the Municipality
cannot structure its budgeting processes to give priority
to the
basic needs of the community. According to the Municipality the
construction of the rule, as contended for by the
Fund, has the
effect of depriving the Municipality of some R70 million plus
interest which amount would otherwise have been spent
on the basic
needs of the community.
[11]
Alternatively, so the argument went,
if the interpretive defence is rejected, then in light of section 50
of the Local Government:
Municipal Finance Management Act
[12]
(MFMA) read with sections 230A,
[13]
193(1)(b), 152(1) and 153 of the Constitution, the rule is
unconstitutional and invalid but this constitutional challenge was
not persisted with. Alternatively, the Municipality argued that
it is contrary to public policy and, in the further alternative
that
it is unenforceable, particularly given the market volatility since
the start of the 2003 financial year – when the
annual rate of
increase of the total assets of the Fund reduced below 5.5%.
The Municipality went so far as speculating that
at that time, also
due to market volatility, it is likely that the annual rate of
increase of the total assets of the Fund would
again be less than
5.5% in the 2010 financial year.
[12]
In a further alternative argument,
the Municipality pleaded that by virtue of sections 7C and 7D of the
Act – read with the
Fund Rules
-
the Board of the Fund owes a duty of good faith to
all the participating employers when investment of assets are made,
having regard
to the risk carried in terms of the rule. In the
event of breach of the duty, in a manner material to the
Municipality’s
funding obligations in any particular financial
year, the Municipality is not liable under the rule.
[13]
In its replication the Fund raised
res iudicata
and issue estoppel to which the Municipality filed a rejoinder.
The Fund contended that attempts to reintroduce the defences
by
raising evidence for the different interpretation should be
rejected. It argued that the defences that the rule is
unconstitutional
and unenforceable, on the ground of public policy,
should be disposed of on the basis of the doctrine of
res iudicata
.
Therefore, the Municipality should be estopped from raising the
defences because they were rejected in the 2003 proceedings
in
Ekurhuleni I
.
In its rejoinder the Municipality said that the public policy defence
arose from the MFMA, which was not in force when the
Local Division
considered the first action in 2003. It later conceded that the
MFMA cannot have retrospective effect to nullify
agreements and
guarantees made before its enactment.
[14]
[14]
The High Court held that the
Municipality’s argument for reconsideration of the
interpretation of the rule was fraught with
difficulties. The
evidence was available before the institution of the 2003 proceedings
and yet the Municipality failed to
seek the leave of the SCA to
introduce it,
[15]
despite the Local Division having remarked about the absence of the
evidence.
[16]
The Court refused to admit the evidence on the basis that the
Municipality failed to meet the established test for admission
of
further evidence.
[17]
It concluded that, even if it was wrong on that point, there was
nothing of substance in the history and development of the
rule that
would lead to a different interpretation to the one in
Ekurhuleni
I
. The Court held that in
Ekurhuleni I
the SCA was mindful of the history of the rule and its predecessor
(rule 43.1)
[18]
and the fact that the scheme changed from a defined benefit fund to a
defined contribution fund.
[19]
Referencing the remarks by the Local Division, the High Court
rejected the public policy defence
[20]
and the fiduciary duty defence.
[15]
The Municipality was ordered to pay
the amount claimed – over R70 million plus interest at
15.5% per annum from 9 June
2010 plus costs of two counsel.
Subsequently, the High Court refused leave to appeal. The
SCA also dismissed the Municipality’s
petition with costs.
In
this Court
[16]
The Municipality seeks leave to
appeal the decision of the High Court.
[21]
It raises the arguments that were raised
a
quo
and asks this Court to uphold the
appeal and replace the High Court’s order with the one
dismissing the action with costs.
The Fund opposes the
application. It seeks an order dismissing the application with
costs, including costs of two counsel.
Leave
to appeal
[17]
In its quest for a reconsideration
of
Ekurhuleni I
,
the Municipality invokes constitutional obligations in sections 152,
153, 195(1)(b) and 230A of the Constitution. It submits
that
the interpretation in
Ekurhuleni I
,
if not revisited, would result in it expending money in contravention
of the various provisions in the Constitution. The
objects of
the Municipality as set out in section 152 have constitutional force:
in terms of section 2 of the Constitution “obligations
imposed
by [the Constitution]” itself, including those mentioned in
sections 152 and 153, “must be fulfilled”.
Consequently, to the extent that the Municipality contends that the
Ekurhuleni I
interpretation will preclude it from fulfilling its constitutional
obligations, the matter does raise a constitutional issue.
[22]
[18]
It is correct that an issue does not
become a constitutional matter simply because an applicant calls it
one. However, as
this Court remarked in
Fraser
[23]
—
“
the
other side of the coin is, however, that an applicant could raise a
constitutional matter, even though the argument advanced
as to why an
issue is a constitutional matter, or what the constitutional
implications of the issues are, may be flawed”.
[24]
This
is so because an “acknowledgement by this Court that an issue
is a constitutional matter . . . does not have to result
in a finding
on the merits of the matter in favour of the applicant who raised
it”.
[25]
In
Gcaba
[26]
this Court affirmed that “[j]urisdiction is determined on the
basis of pleadings . . . and not the substantive merits of
the
case”.
[27]
[19]
The fact that the matter raises
constitutional issues does not automatically result in leave to
appeal being granted.
[28]
The interests of justice dictate whether leave to appeal should be
granted. A determination of where the interests
of justice
reside calls for a careful consideration of numerous factors,
including prospects of success which is important but
not
decisive.
[29]
As here, there may be instances where public interest
considerations
[30]
despite lack of prospects of success, warrant consideration of the
issues.
[31]
Indeed, pension fund guarantees may have huge implications on the
constitutional responsibilities of municipalities.
The
guarantees may be structured in a way that impact on the economic
development of the local communities thereby resulting in
mismanagement of municipal budgeting, contrary to what the
Constitution envisages in sections 152(1),
[32]
153,
[33]
195(1)(b).
[34]
The issues regarding the interpretation and enforcement of the
rule, having regard to the said constitutional obligations,
were not
the focal point of the Court in
Ekurhuleni
I
.
[35]
[20]
In
Ekurhuleni
I
the SCA was concerned with the
interpretation of the rule having regard to the context; nature of
the Fund; purpose of the rule;
and the rule’s general practice
and effect in order to give it its commercially sensible meaning.
But here the issues
raised, regarding the effect of the
interpretation of the rule – having regard to the said
constitutional principles and
public policy considerations, were
squarely pleaded and argued
a quo
.
However, the High Court paid no attention to them. Those issues
transcend the narrow interests of the parties because
they may impact
on the mentioned obligations and may implicate the interests of local
communities.
[36]
Therefore, the issues ought to be considered by this Court.
Different to the view held by Jafta J in the second judgment
that
leave to appeal should be refused, I conclude that the interests of
justice warrant granting leave to appeal.
Defences
[21]
The Municipality resists the claim
on the basis of three independent defences which, it argues, were not
considered in
Ekurhuleni I
.
These are: a defence on the reconsideration of the interpretation in
Ekurhuleni I
based on the “new” evidence of the accounting records of
the Fund and the history of the rule; a public policy defence;
and
the breach of duty of good faith defence. Additionally, the
Municipality challenges the High Court’s exercise of
discretion
regarding the doctrine of issue estoppel. The Fund objects to
the Municipality’s defences and raises the
doctrine of
res
iudicata
and issue estoppel
.
These doctrines will be dealt with later in this judgment.
Reconsideration
of Ekurhuleni I based on “new” evidence
[22]
The Municipality argues that
Ekurhuleni I
must be overturned because the SCA’s interpretation presupposes
that the rule contemplates market value as opposed to book
value and
treats unrealised capital gains or losses as part of the interest
actually earned on the assets of the Fund. Relying
on the “new”
evidence – of the history of the rule and of the Fund’s
financial accounts when the rule was
introduced – to show that
it had been valued at book value and not at market value, the
Municipality submits that the SCA’s
interpretation is wrong and
must be rejected.
[23]
The high-water mark of the
Municipality’s case for reconsideration is the evidence of the
actuary, Mr Andrew. The Municipality
argues that it is unfair
not to allow the “new” evidence because its failure to
raise it in the previous litigation
will result in the rule being
used against it in perpetuity while there is untested evidence that
could render it liability free.
Before rejecting the “new”
evidence, certain factors need to be considered to assess
unfairness.
[37]
[24]
The sufficiency of the explanation
given for not adducing the evidence that was available when th
e
first claim w
as instituted is a weighty
consideration. Also, the potential prejudice, not only to the
Fund but also to the employees who
are protected by the investment
guarantee is another factor that cannot be overlooked. More
importantly, finality in litigation
should be preserved rather than
being eroded.
[38]
Finally, regard must be had to the fact that the parties negotiated
and agreed to the amended rules of the pension fund,
which resulted
in the Fund’s conversion in 1994.
[25]
The so called “new”
evidence of the calculations of the past performances is not relevant
to the interpretation of the
rule. Before 1990, the Fund was
structured as a predominantly defined benefit fund
[39]
rather than a defined contribution fund.
[40]
The turning point occurred in 1994, where the benefits and
obligations were changed so as to convert it to a predominantly
defined contribution fund. It is in 1994 that rule 10.8.1, as
it stands today, was incorporated into the Fund’s rules.
The history and financial records during this time are useful for the
determination of the payment of a guaranteed investment for
future
financial years. It is therefore essential to consider the
changes in the Fund that occurred in 1994 in interpreting
the Fund’s
rules as they apply today.
[26]
The evidence presented by Mr Andrew
bears no relevance to the interpretation of the rule insofar as he
fails to account for the
implications of the Fund’s conversion
in 1994. The available evidence shows that, for the financial
years ending June
1992 and June 1994, respectively, shares were
valued at both cost and market values. The evidence presented
by Mr Andrew
is inconclusive, at best. Besides, the “new”
evidence sought to be relied on surfaced during conversation about
this case in August 2011. It was based on speculation that
the term “money” meant book value consistent
with
actuarial practice to value assets at book value, bearing in mind
that the Fund was established in 1924. During argument
the
Municipality accepted that the “new” evidence was always
available, and that no cogent explanation was advanced
as to why it
was not relied upon earlier. It conceded that the test for
introducing the evidence was not met and that the
reason for such
admission was weak. I consider that the evidence, including the
evidence of the history of the Fund which
remains undisputed,
fortifies the interpretation in
Ekurhuleni
I
.
[27]
What’s more, that evidence
shows that in the three financial years preceding the year ending
June 2003, the average rate of
interest on the total moneys of the
Fund far exceeded 5.5%. For example, for the financial years
ending June 2001 and 2002,
the average annual rate of interest on the
total money of the Fund (not only cash) was 15.7% and 12.5%,
respectively. These
percentages were calculated on the
interpretation contended for by the Fund. If this
interpretation was used to the benefit
of the Municipality, to the
extent that it resulted in a finding that the yield was more than
5.5% and the Municipality thus needed
not to pay any shortfall, then
it should in equal measure be used to the benefit of the Fund when
there is a shortfall in terms
of the rule.
[28]
The High Court did not misdirect
itself in rejecting the “new” evidence. The
admission of the “new”
evidence must be refused and on
this ground alone, the interpretive defence should fail. It
follows that the interpretation
of the rule in
Ekurhuleni
I,
which was never overturned on
appeal, remains binding. The issue of
res
iudicata
thus arises.
Res
iudicata
[29]
The Fund submits that the matter is
res iudicata
.
[41]
This doctrine is founded on public policy which requires that
litigation should not be endless
[42]
,
especially when the demand for payment of money is based on the same
ground. And, as the law regarding this doctrine remains
settled, the enquiry is not whether the decision is right or wrong,
but simply that there is a decision.
[43]
This must not be understood to suggest that
Ekurhuleni
I
was incorrect. The construction of the rule in that case
is unassailable: the SCA had regard to, among other things, the
language used; the context of the contract as a whole in giving it a
commercially sensible meaning; the purpose of the rule; the
general
practice in the pension fund industry; and the impact of the rule on
the members of the Fund. Also, the Court took
into account the
nature of the Fund when it was established in 1924 – as a
predominantly defined benefit fund, on the one
hand, and its nature
after the conversion in 1994 - as a predominantly defined
contribution fund, on the other. Nonetheless,
it is
the
res iudicata
issue – and not the correctness of the
Ekurhuleni
I
interpretation – that should
take centre stage in the debate.
[30]
The Municipality argues that
res
iudicata
does not apply because of the
absence of sameness in the cause of action and relief sought.
The Fund maintains that the plea
of
res
iudicata
applies. It argues that
even if it did not apply, the Municipality would be precluded from
bringing the defence on the basis
of issue estoppel.
[44]
[31]
It is correct that the claim for
payment is for different financial years and amounts. The
submission that
res iudicata
does not apply because of the lack of sameness in the cause of action
is misconceived. Sameness is determined by the identity
of the
question previously set in motion.
[45]
The ground for demanding payment is similar to the one in the
previous litigation between the same parties; on the same cause
of
action and for the same thing. The fact that the claim is for
different financial years and amounts, is no licence for
the
Municipality to raise the same interpretive defence. If that is
allowed it will, impermissibly, prevent the Fund from
relying on
Ekurhuleni I
.
Reliance
on the Constitution
[32]
The Municipality argues that the
correct interpretation must be consistent with the public duties of
municipalities in terms of
sections 152(1)(a), 153, 195(1)(b)
and 230A of the Constitution. It argues that an open-ended
guarantee in the rule
would unreasonably give primacy to the
interests of the members of the Fund over any needs of the
community. That, it is
argued, is at odds with the Constitution
and section 50 of the MFMA.
[46]
[33]
It is correct that the
constitutional provisions relied upon provide general obligations on
the Municipality to ensure that public
funds are used in an economic
and effective manner. However, there is simply no evidence to support
any suggestion that the Municipality
is, because of the unlimited
nature of the exposure through the guarantee, unable to meet its
constitutional obligations. Despite
being invited during the
hearing, to demonstrate that the discharge of its
constitutional obligations have been impeded by
its liability in
terms of the rule, the Municipality failed to do so. Therefore,
there is no merit in the Municipality’s
argument that the rule
has a continuing oppressive consequence.
[34]
The interpretative defence based on
the constitutional principles should also fail.
Public
policy defence
[35]
The Municipality argues that though
the rule is not inherently unlawful it should not be enforced because
its enforcement, for the
2007 - 2008 and 2008 - 2009 financial years,
would offend public policy and provide members with a gratuitous
windfall whilst public
funds are utilised for “no legitimate
public purpose”. The defence is basically that the
Municipality uses public
funds to pay the guarantee in terms of the
rule when these funds could otherwise be used to fulfil its
constitutional duties.
[47]
It is contended that the enforcement is contrary to public policy
particularly given the market volatility since the start
of the 2002
- 2003 financial year. The annual rate of increase of the total
assets of the Fund, it is argued, fell below
5.5% in respect of the
2003, 2008 and 2009 financial years. As it did in the High
Court, the Municipality went so far as
speculating that also due to
market volatility, it is likely that the annual rate of increase of
the total assets of the Fund will
again be less than 5.5% in the 2010
financial year.
[36]
It is now trite that all law,
including contract law, derives its force from the Constitution.
Generally, as this Court remarked
in
Barkhuizen
,
public policy represents the legal convictions of the community.
[48]
It requires parties to a bargain to comply with their contractual
obligations that have been “freely and voluntarily
undertaken”.
[49]
The principle “gives effect to the central constitutional
values of freedom and dignity”.
[50]
[37]
It needs to be stressed that the
guarantee in terms of the rule was negotiated by all concerned and
agreed upon by the parties.
To that end, the consequences of
enforcing the rule were foreseen by the parties. Therefore,
given the interpretation
in
Ekurhuleni
I
, which I accept as binding on the
parties, the enforcement of the guarantee cannot, in the
circumstances, be contrary to public
policy. This is because
the bargain was freely undertaken for a legitimate purpose for which
it was intended – to stand
as a framework to safeguard the
interests’ of the employees of the Municipality.
[38]
To allow the Municipality to escape
liability by extricating itself from the bargain, when it has failed
to establish the threatened
rights or even advance cogent reasons for
its failure to comply with its contractual obligation, would
constitute an injustice
for the Fund.
[51]
It would frustrate the principle of
pacta
sunt servanda
and the very purpose the
rule was intended to achieve. This is so, because when the
Municipality agreed to the bargain, it
did so as a contributing
employer for the benefit of its employees in a bargaining process
that is at the very heart of the employment
relationship.
[39]
There may well be circumstances in
which the unlimited exposure of the Municipality through the
investment guarantee may make it
impossible for it to perform its
constitutional duties. This is not the case here. This
Court’s power should
therefore not be used to nullify that
which has been freely and voluntarily agreed upon by the parties.
As was the position
in 1993 – 1994 when the rule was amended,
it is open to the parties and the members of the Fund to renegotiate
the amendment
of the rule.
[52]
On the issue of the amendment of the rule, the Municipality argues
that it is powerless to amend the rule because the members
of the
Fund have a veto over any amendments to the Fund Rules as an
amendment requires support from a two - thirds’ majority
of
members. I disagree. To suggest that the amendment was or
is not attainable because of the said amendment procedure
and thus
seek relief from the Court that essentially avoids the process is
simply to reverse the sensible order of things.
[40]
I conclude that this defence is
conceptually unsound. It must fail.
Duty
of good faith defence
[41]
The Municipality’s further
defence is that the Board of the Fund owes it a duty of good faith
because the Fund has an obligation,
when investing assets, to take
proper account of the risk it carries. The Municipality relied
on section 7C
[53]
of the Act. But the reliance on this section is incorrect.
The section tells us what the objects of the Board are,
in relation
to the Fund. The primary duty of good faith by the Board is
owed to the Fund and its members – the employees
of the
Municipality.
[54]
The Fund argues, rightly so, that a reference to the Board owing a
duty of good faith is not a duty owed to the Municipality.
It
is a duty of good faith the Board owes to the Fund and its members.
Hence the reference to section 7C by the Municipality
to plead duty
of good faith owed to it is misplaced.
[42]
The Act recognises that the Board of
the Fund has responsibility to take all reasonable steps to ensure
that the interests of members
are protected at all times, in terms of
the Fund Rules.
[55]
But nothing is said about protecting the interests of employers.
But, even on the assumption that the Municipality
– as an
employer and contracting party – is owed the duty, there should
at least be evidence of actual breach.
For one to succeed in an
action for breach of a duty of good faith, the duty should be well
pleaded. The breach should also
be pleaded and the proof of
such breach stated with precision. This is so because breach is
a matter of evidence. It has
to be established and proved.
[56]
None is established here. The evidence of Mr Andrew in this
regard too favours the case of the Fund that there is no
duty of good
faith to the Municipality. To this end, this defence must
similarly fail.
Improper
exercise of discretion
[43]
The Municipality argues that the
High Court misdirected itself in relation to issue estoppel. It
is argued that the Court
erred in failing to have regard to any of
the considerations of equity and fairness advanced by the
Municipality as reasons not
to extend the defence of
res
iudicata
through issue estoppel.
The High Court erred in holding that the Municipality did not attack
the defence of issue estoppel.
It did not consider the
rejoinder that was filed by the Municipality in which the defence was
raised. However, the misdirection
is not fatal to the Fund’s
case.
[44]
I have already determined that the
doctrine of
res iudicata
finds application in relation to the interpretive defence. It
was thus not necessary to extend
res
iudicata
through issue estoppel.
Even if I am wrong in this regard, there should be no rigid adherence
to the requirements of
res iudicata
.
In
Royal Sechaba
[57]
the SCA held that the expression “issue estoppel” is a
convenient description of instances where a party may succeed
despite
the fact that the classic requirements for
res
iudicata
have not been complied with.
Conclusion
[45]
I would grant leave to appeal,
dismiss the appeal and order the Municipality to pay costs including
costs of two counsel.
The effect of this order would be
upholding the order of the High Court.
Order
[46]
The following order is made:
1.
Leave
to appeal is granted.
2.
The
appeal is dismissed with costs including costs of two counsel.
JAFTA J:
[47]
I have had the opportunity to read
the judgment prepared by my colleague Nkabinde ADCJ (first
judgment). Regrettably, I am
unable to agree with the outcome
it proposes and the route it follows. The first judgment grants
leave to appeal but dismisses
the appeal. I hold that leave
must be refused.
[48]
Although the Germiston Municipal
Retirement Fund (Fund) was established in 1924 and its rules were
duly registered, the version
of the rules we are concerned with
originates from an agreement reached between Ekurhuleni Metropolitan
Municipality (Municipality)
and members of the Fund. The
Registrar of Pension Funds approved and registered those rules on 1
May 1994.
[49]
Rule 10.8.1 provides:
“
If the rate of interest earned on the total
monies (including any uninvested monies) of the Fund during any
financial year should
be lower than five and one-half per cent (5.5%)
the council shall contribute to the Fund such a sum as would
increase, on being
added to the interest actually earned, the rate of
interest to five and one-half per cent (5.5%) during such financial
year.”
[50]
This rule, as it plainly appears
from its text, obliges the Municipality to contribute to the Fund
whenever interest earned on total
monies in any financial year falls
below 5.5%. The contribution made by the Municipality must
raise the interest to 5.5%.
The Municipality’s obligation
under the rule arises from the fact that it is the employer of
members of the Fund.
[51]
During the financial year that
commenced on 1 July 2007 and ended on 30 June 2008, the
Fund earned interest at the rate
of 3.8%. The Fund called upon
the Municipality to make good the shortfall below 5.5%. In
pursuing its claim, the Fund
relied on the interpretation placed on
the same rule by the Supreme Court of Appeal in
Ekurhuleni
I
.
[58]
In that case the Supreme Court of Appeal construed the rule to mean
that the Municipality was obliged to make good the difference
between
the value of all assets and the 5.5% appreciation in value in any
given financial year.
[52]
The Supreme Court of Appeal rejected
the argument advanced by the Municipality to the effect that, if a
financial year end coincided
with a temporary fall in the stock
market and soon afterwards the market improved, the Fund would have a
windfall unrelated to
earnings generated on its investments.
The Court rejected this argument on the ground that in the context of
the rule and
its purpose, the argument rendered the rule commercially
unsound. Lewis JA said:
“
Having regard to the context of the rules –
the nature of the Fund, the general practice of pension funds, and,
most importantly,
the purpose and effect of the Rule – the only
sensible commercial meaning to be given to it is that argued for by
the Fund
and accepted by the [H]igh court. The Municipality is
accordingly obliged to pay to the Fund the amount claimed.”
[59]
[53]
Following the interpretation
assigned by the Supreme Court of Appeal in
Ekurhuleni
I
, the High Court here held that the
Municipality was obliged to make good the shortfall and ordered it to
pay the sum of R70 456 371
to the Fund with interest at the
rate of 15.5% per year. This is the order against which the
Municipality now seeks leave
to appeal.
[54]
For an application for leave to
appeal like the present to succeed, it must meet two requirements.
First, the matter must
fall within this Court’s jurisdiction.
Second, it must be in the interests of justice that leave be
granted.
Both these requirements can be traced to the
Constitution which is our supreme law. Section 167(6) of the
Constitution makes
it plain that matters may be brought to this Court
only with its leave and that a litigant may be permitted to have
access to it
if it is in the interests of justice.
[60]
[55]
Section 167(3), as amended by the
Seventeenth Amendment, delineates this Court’s jurisdiction.
In this context jurisdiction
means the power vested in this Court to
hear and decide cases. It specifies matters which this Court
may decide. This
section provides:
“
The Constitutional Court
(a) is the highest court of the Republic; and
(b) may decide
(i) constitutional matters; and
(ii) any other matter, if the Constitutional Court grants leave to
appeal on the grounds that the matter raises an arguable point
of law
of general public importance which ought to be considered by that
Court; and
(c)
makes the final decision whether a matter is within its
jurisdiction.”
[56]
Plainly the text shows that matters
over which the Court has jurisdiction fall into two categories.
The first is of constitutional
matters and the other is of matters
that raise an arguable point of law of general public importance
which must be considered by
this Court. But for present
purposes we are not concerned with the second category and nothing
more will be said about it.
[57]
Notably, section 167(3)(c) proclaims
that this Court “makes a final decision whether a matter is
within its jurisdiction”.
This demonstrates that it does
not follow automatically from allegations made by a litigant to the
effect that a matter falls within
those categories. The Court
itself must be satisfied that the matter falls within its
jurisdiction. This was underscored
in
Paulsen.
[61]
There Madlanga J said:
“
Where, in an application for leave to
appeal founded on a constitutional matter, this Court holds that
there is indeed a constitutional
issue, that does not automatically
lead to the grant of leave.”
[62]
[58]
It is the duty of the applicant for
leave to place before the Court facts showing that the matter falls
within its jurisdiction.
And it is for this Court to determine
if indeed that is so. Here the Municipality in order to show
jurisdiction makes these
averments:
“
5 This case raises constitutional issues of
importance relating to:
5.1 The proper interpretation of a rule in a municipal pension fund
having regard to sections 152(1)(a), 153, 195(1)(b) and 230A
of the
Constitution and section 50 of the Municipal Finance Management Act
56 of 2003 (“the MFMA”);
5.2 The enforcement of a rule of a pension fund in circumstances
where, having regard to the particular facts of the present case,
such enforcement would be contrary to public policy because it would
require public funds to be utilised for no legitimate public
purpose;
5.3 The duty of good faith owed by a public sector pension fund to
make investment decisions that do not unreasonably expose a
public
sector employer to the risk of having to use public funds to
underwrite the investment performance of that fund in any particular
financial year; and
5.4
The exercise of judicial discretion in relation to the doctrine of
issue estoppel in cases concerning payment of public funds
under
instruments which impose indefinite ongoing obligations on organs of
state.”
[59]
Having considered this statement,
the first judgment holds:
“
Consequently, to the extent that the
Municipality contends that the
Ekurhuleni
I
interpretation will preclude it from
fulfilling its constitutional obligations, the matter does raise a
constitutional issue.”
[63]
[60]
But having reached this conclusion,
the first judgment continues to hold:
“
It is correct that the constitutional
provisions relied upon provide general obligations on the
Municipality to ensure that public
funds are used in an economic and
effective manner. However, there is simply no evidence to support any
suggestion that the Municipality
is, because of the unlimited nature
of the exposure through the guarantee, unable to meet its
constitutional obligations.
Despite being invited during the
oral hearing, to demonstrate that the discharge of its constitutional
obligations have been impeded
by its liability in terms of the rule,
the Municipality failed to do so. Therefore, there is no merit
in the Municipality’s
argument that the rule has a continuing
oppressive consequence.”
[64]
[61]
It is quite plain from this
conclusion that the consequences of the impugned interpretation of
the relevant rule of the Fund contended
for by the Municipality were
devoid of any merit. But over and above that the interpretative
approach advanced here has no
basis in law. There is no rule of
interpretation that obliges a court, when interpreting a rule in a
municipal pension fund,
to have “regard to sections 152(1)(a),
153, 195(1)(b) and 230A of the Constitution and section 50 of the
Municipal Finance
Management Act.”
[62]
Without any obligation or principle
requiring that the interpretive process be informed by those
provisions and in the absence of
facts showing that the enforcement
of the relevant rule would impede the Municipality from discharging
its constitutional obligations,
there is simply no constitutional
issue raised here. None is identified in the first judgment
except repeating the mere say
so of the Municipality. The fact
that the High Court failed to have regard to what was pleaded wrongly
by the Municipality
does not create a constitutional issue where none
exists.
[63]
Therefore, it cannot be said that
the Supreme Court of Appeal too was wrong in
Ekurhuleni
I
when it interpreted the relevant rule
of the Fund without paying any attention to provisions in the
Constitution and the Act.
Nor can it be said that these
provisions have any role to play in the interpretation of the
relevant rule. Apart from the
provisions of the Bill of Rights,
the Constitution plays no role in the interpretation of
documents,
[65]
except that a meaning of legislation that is consistent with the
Constitution is to be preferred over a meaning that leads to
inconsistency.
[64]
But even the role of the Bill of
Rights is limited to the interpretation of legislation and not rules
of a pension fund that constitute
a contract between the affected
parties. Consequently, the interpretation of the relevant rule
does not raise a constitutional
issue only because the Municipality
says so. In
Fraser
van der Westhuizen J said:
“
Moreover, this Court will not assume
jurisdiction over a non-constitutional matter only because an
application for leave to appeal
is couched in constitutional terms.
It is incumbent upon an applicant to demonstrate the existence
of a
bona fide
constitutional question.
An issue
does not become a constitutional matter merely because an applicant
calls it one
.”
[66]
[65]
This is so because the existence of
a constitutional issue does not depend on what litigants say. A
determination of this
issue depends on the proper application of the
Constitution itself on the facts of a particular case. If a
litigant relies
on a provision that is not applicable to its case, it
can hardly be argued that the litigant has raised a bona fide
constitutional
question. This Court’s jurisdiction may
only be invoked for adjudication of genuine issues that warrant
consideration
by it. Bogus matters fall outside the scope of
this Court’s jurisdiction. And unmeritorious cases do not
justify
the granting of leave because it is not in the interests of
justice to waste judicial resources on such matters.
[66]
However, it is true that in
Fraser
this Court stressed the fact that the
other side of the coin is that the applicant is not, in order to
raise a constitutional issue,
required to advance a flawless
argument. This does not mean any argument, no matter how
spurious it is, will sufficiently
raise a constitutional issue.
On the contrary, by this statement the Court meant that, although not
flawless, the argument
must raise a genuine or authentic
constitutional issue which carries with it prospects of being
upheld. In other words, while
an applicant may not raise a fake
issue, he or she is not required to show that his or her argument
will eventually succeed.
The bottom line is that the applicant
must raise a bona fide constitutional issue.
[67]
The High Court in this matter was
bound by the interpretation assigned to the relevant rule by the
Supreme Court of Appeal in
Ekurhuleni
I
. In
Robin
Consolidated Industries
that Court
held:
“
[O]nce the meaning of the words of a
section in an Act of Parliament have been authoritatively determined
by this Court, that meaning
must be given to them, even by this
Court, unless it is clear to it that it has erred. Particularly
it is important to observe
stare decisis
when a decision has been acted on for a number of years in such a
manner that rights have grown up under it.”
[67]
[68]
The first judgment affirms that the
interpretation in
Ekurhuleni I
was binding. It concludes:
“
Therefore,
given
the interpretation in Ekurhuleni I which I accept as binding on the
parties, the enforcement of the guarantee cannot, in the
circumstances, be contrary to public policy
.
This is because the bargain was freely undertaken for a legitimate
purpose for which it was intended – to stand as
a framework to
safeguard the interests of the employees of the Municipality.”
[68]
[69]
The conclusions reached in the first
judgment do not only demonstrate the absence of a bona fide
constitutional issue but also show
lack of prospects of success.
The central plank on which the Municipality grounded the assertion
that the construction in
Ekurhuleni I
must be overturned was that that interpretation was reached without
taking into account the background evidence which the Municipality
sought to place before this Court. The Municipality did not
contend that the Supreme Court of Appeal’s interpretation
was unsound if no reference was made to the new evidence. On
the contrary it accepted that the interpretation was sound but
it
asserted that if the evidence had been taken into account, a
different meaning could have been given to the rule in question.
[70]
Accordingly for the interpretation
in
Ekurhuleni I
to be rejected, the admission of the new evidence is crucial.
For the meaning of the rule advanced by the Municipality may
only
arise if the rule is construed in the context of that evidence.
This is because the construction in
Ekurhuleni
I
accords with the text of the rule.
Since no case has been made out for the admission of the new
evidence, I agree with the
first judgment that the request for its
admission must be rejected. This removes the only feature on
which the Municipality
attempted to distinguish this matter from
Ekurhuleni I
.
[71]
Although the first judgment holds
that the High Court’s failure to apply constitutional
principles to the interpretation of
the relevant rule justify the
granting of leave, it does not apply those principles to
construe the rule afresh.
[69]
Instead the High Court’s interpretation of the rule in
question is endorsed as correct. This underscores
the point
that it is not in the interests of justice to grant leave.
[72]
It follows that the application for
leave must be dismissed.
For
the Applicant: A E Franklin SC and M Chaskalson SC instructed by
Bowman Gilfillan Inc
For
the Respondent:
C D A Loxton SC and N Fourie
instructed by Len Dekker & Associates
[1]
Ekurhuleni Metropolitan Municipality v
Germiston Municipality Retirement Fund
[2015]
ZAGPPHC 1143, delivered on 22 May 2015, per Mothle J (High Court
judgment).
[2]
The rule is set out in full later in this
judgment at [5].
[3]
117 of 1998. It is the successor in title
to the Transition Local Council of the Greater Germiston and Eastern
Gauteng Services
Council in terms of section 24 of the Local
Government: Municipal Structures Act.
[4]
Rule 1.5 of the Fund Rules defines “the
council” and “employer” as referring to the
Municipality.
[5]
24 of 1956.
[6]
Germiston Municipal Retirement Fund v
Ekurhuleni Metropolitan Municipality
,
unreported judgment of the High Court of South Africa, Gauteng Local
Division, Johannesburg, Case No 17692/2004 (3 May 2007)
(Local
Division judgment)
.
[7]
Ekurhuleni Metro Municipality v Germiston
Municipal Retirement Fund
[2009] ZASCA
154
;
2010 (2) SA 498
(SCA) (
Ekurhuleni
I
).
[8]
For the financial year of 1 July 2007 to 30 June
2008, the Fund earned a rate of interest of 3.89% translating to
R19 571 034.37
of which R303 095.22 represented the
liability of other participating employers. For the succeeding
financial year
of 1 July 2008 to June 2009 it earned a rate of
interest of 0.40% translating to R59 748 601.00, of which
R878 416.00
represented the liability of other participating
employers. In total, the Municipality had to pay a sum of
R78 138 124.15.
[9]
In
Ekurhuleni I
the Municipality
refused to pay the shortfall on the rate of interest earned during
the 2002-2003 financial year. This
dispute came before the
Local Division, where the issue of the correct interpretation of the
rule was raised by the Municipality.
The Local Division
rejected the construction contended for by the Municipality and
ordered it to pay the shortfall. The
Municipality appealed to
the Supreme Court of Appeal, which dismissed the appeal and upheld
the Local Division’s interpretation
of the rule. It
ordered the Municipality to pay the shortfall as, in its terms, the
rule provided a “safety net”
for the members of the
Fund.
[10]
Section 152(1) provides:
“The objects of local government are—
(a) to provide democratic and accountable government for local
communities;
(b) to ensure the provision of services to communities in a suitable
manner;
(c) to promote social and economic development;
(d) to promote a safe and healthy environment; and
(e) to encourage the involvement of communities and community
organisations in the matters of local government.”
[11]
Section 153 provides:
“A municipality must—
(a) structure and manage its administration and budgeting and
planning processes to give priority to the basic needs of the
community, and to promote the social and economic development of the
community; and
(b) participate in national and provincial development programmes.”
[12]
56 of 2003. Section 50 provides that:
“
A municipality may not issue any guarantee
for any commitment or debt of any organ of state or person, except
on the following
conditions:
(a) The guarantee must be within limits specified in the
municipality’s approved budget;
(b) a municipality may guarantee the debt of a municipal entity
under its sole control only if the guarantee is authorised by
the
council in the same manner and subject to the same conditions
applicable to a municipality in terms of this Chapter if it
incurs
debt;
(c) a municipality may guarantee the debt of a municipal entity
under its shared control or of any other person, but only with
the
approval of the National Treasury, and then only if—
(i) the municipality creates, and maintains for the duration of the
guarantee, a cash-backed reserve equal to its total potential
financial exposure as a result of such guarantee; or
(ii) the municipality purchases and maintains in effect for the
duration of the guarantee, a policy of insurance issued by a
registered insurer, which covers the full amount of the
municipality’s potential financial exposure as a result of
such
guarantee.”
[13]
Section 230A provides:
“
(1) A Municipal Council may, in accordance
with national legislation—
(a) raise loans for capital or current expenditure for the
municipality, but loans for current expenditure may be raised only
when necessary for bridging purposes during a fiscal year; and
(b) bind itself and a future Council in the exercise of its
legislative and executive authority to secure loans or investments
for the municipality.
(2) National legislation referred to in subsection (1) may be
enacted only after any recommendations of the Financial and Fiscal
Commission have been considered.”
[14]
High Court judgment above n 1 at para 49.
[15]
Id at para 38.
[16]
Id at para 37. In para 43 the Local
Division above n 6 remarked:
“
Mr Andrew speculated that the term
‘moneys’ might mean book value (that is the purchase
price of the asset) because
‘this would be consistent with
actuarial practice to value assets at book value (bearing in mind
the Fund was established
in 1924).’ But there is no
evidence when the rule was introduced, nor whether, what actuaries
were accustomed to
‘historically’, had any connection
with the drafting of the rule. If [the Municipality] wanted to
rely on this
interpretation it would have been necessary to plead a
technical meaning of the rule in an actuarial sense. No such
technical
or special meaning was pleaded nor was it proved.
The [Municipality’s] contentions on this score fall to be
rejected.”
[17]
High Court judgment above n 1 at paras 39-40.
[18]
Rule 43.1 provided the following:
“
If
the rate of interest earned on the total moneys (including any
uninvested moneys) of the Fund during any financial year should
be
lower than five and one-half percent (5.5%) the Council shall
contribute to the Fund such a sum as would increase, on being
added
to the interest actually earned, the rate of interest to five and
one-half per cent (5.5%) during such financial year.”
[19]
High Court judgment above n 1 at para 41
referring to the SCA’s remarks in
Ekurhuleni
I
at para 7.
[20]
High Court judgment above n 1 at paras 49-50
referring to the
Local Division judgment above n 6 at paras
66-8.
[21]
The High Court order reads:
“1. The action instituted by the Fund against the Municipality
succeeds;
2. The Municipality is ordered to pay the Fund an amount of
R70,681,752.61 as the shortfall due in terms of Rule 10.8.1 of the
Fund’s rules plus interest thereon at 15.5% per year from 9
June 2010; and
3. The Municipality is ordered to pay the costs of this action
including costs of two counsel.”
[22]
S
ection 167(7) of the Constitution
provides that “[a] constitutional matter includes any issue
involving the interpretation,
protection or enforcement of the
Constitution”.
[23]
Fraser v ABSA Bank Limited
[2006] ZACC 24; 2007 (3) SA 484
(CC); 2007 (3) BCLR 219 (CC).
[24]
Id at para 40.
[25]
Id.
[26]
Gcaba v Minister for Safety and Security
[2009] ZACC 26
;
2010
(1) SA 238
(CC);
2010 (1) BCLR 35
(CC).
[27]
Id at para 75.
[28]
Paulsen v Slip Knot Investments 777 (Pty)
Limited
[2015] ZACC 5; 2015 (3) SA 479
(CC); 2015 (5) BCLR 509 (CC).
[29]
S v Boesak
[2000] ZACC 25
;
2001 (1) SA 912
(CC); 2001 (1) BCLR (CC) 36 at paras
10-2.
[30]
Paulsen
above n
28 at para 29.
[31]
De Lange v Presiding Bishop of the Methodist Church
[2015]
ZACC 35
;
2016 (2) SA 1
(CC);
2016 (1) BCLR 1
(CC) at para 29.
[32]
See section 152(1) above n 10.
[33]
See section 153 above n 11.
[34]
Section 195(1)(b) provides:
“
Public administration must be governed by
the democratic values and principles enshrined in the Constitution,
including the following
principles:
. . .
(b) Efficient, economic and effective use of resources must be
promoted”.
[35]
As this Court held in
Allpay
Consolidated Investment Holdings (Pty) Ltd v Chief Executive Officer
of the South African Social Security Agency (No 2)
[2014] ZACC 12
;
2014 (4) SA 179
(CC);
2014 (6) BCLR 641
(CC) at para
49, “[o]rgans of state have obligations that extend beyond the
merely contractual”. If the interpretation
in
Ekurhuleni
I
is to bring the Municipality at odds
with its constitutional obligations, the enforcement of the contract
may result in unconstitutional
conduct which may be rendered
invalid.
[36]
Paulsen
above n 28 at para 26.
[37]
See in this regard
Zondi v MEC for Traditional and Local
Government Affairs
[2004] ZACC 19
;
2005 (3) SA 589
(CC);
2005
(4) BCLR 347
(CC) at paras 22-3.
[38]
Royal Sechaba Holdings (Pty) Ltd v Coote
[2014] ZASCA 85
;
2014 (5) SA 562
(SCA) at para 21 (
Royal
Sechaba).
See also
Rail
Commuters Action Group v Transnet Ltd t/a Metrorail
[2004] ZACC 20
;
2005 (2) SA 359
(CC);
2005 (4) BCLR 301
(CC) at para
41.
[39]
This is where every member of the Fund is
promised a pension fund benefit that is calculated as a percentage
of the members’
salary on retirement. So, the
contribution of the Municipality, as an employer, was calculated to
meet the promise of a
particular benefit.
[40]
This is where the Fund Rules define the
contribution to be paid by both members and the employer.
There is no guarantee
of any particular benefit by a member and
equally, where there is a surplus or loss by the Fund the employer
does not get the
benefit of a contribution nor does it have to pay
where there is a loss. The conversion by way of an amendment
of the rule
was discussed with all concerned: The Fund, members and
the Municipality.
[41]
The doctrine is established when a matter has already been
adjudicated upon in previous litigation. A party seeking
reliance
on it must show that the claim is between the same parties
(
eadem persona
); on the same cause of action (e
adem causam
petendi
); and for the same thing (
eadem res
).
See
in this regard
Molaudzi v S
[2015] ZACC 20
;
2015 (2) SACR 341
(CC);
2015 (8) BCLR 904
(CC) at
para16;
Prinsloo NO v Goldex 15 (Pty)
Ltd
[2012] ZASCA 28
;
2014 (5) SA 297
(SCA) on the requirements of the doctrine (
Prinsloo
).
See also
Hyprop Investments Ltd v NSC
Carriers and Forwarding CC
[2013]
ZASCA 169
;
2014 (5) SA 406
(SCA) (
Hyprop
).
Such requirements were previously referred to as: same subject
matter, same grounds, same parties. See
Midford’s
Executor v Ebden’s Executors
1917 AD 682
at 686.
[42]
Yellow Star Properties 1020 (Pty) Ltd v
Department of Development Planning and Local Government (Gauteng)
[2009] ZASCA 25
;
2009 (3) SA 577
(SCA)
at para 21;
Evins v Shield Insurance Co
Ltd
1980 (2) SA 815
(A) at 835G.
[43]
Pratt v Firstrand Bank Ltd
[2014] ZASCA 110
at para 8;
African Farms & Townships Ltd v Cape Town Municipality
1963 (2) SA 555
(A) at 564C-G.
[44]
The strict requirements of the doctrine of
res iudicata
have
been relaxed by South African courts and extended through the
doctrine of issue estoppel. The application of issue
estoppel
as part of our law was accepted in the case of
Boshoff v Union
Government
1932 TPD 345
and
Kommissaris van Binnelandse
Inkomste v Absa Bank Bpk
[1994] ZASCA 144
;
1995 (1) SA 653
(A). The SCA has recently confirmed the
application of issue estoppel in
Hyprop
above n 41 at para
14. Essentially, issue estoppel is an extended defence that
can be raised by a defendant, where a court
is vested with the
discretion to relax the requirement of the “same thing”.
Put differently, issue estoppel
finds application where the
plea of
res iudicata
is raised in the absence of commonality
of cause of action and relief claimed. However, relevant case
authorities require a court
to exercise this relaxation with caution
on a case-by-case basis, considering the question of equity and
fairness not only for
the litigating parties, but also others, in
this regard see
Prinsloo
above n 41 at para 26 and
Hyprop
above n 41 at para 20.
[45]
See
African Farms
above n 43 at 562.
[46]
See section 50 quoted above n 12.
[47]
The Municipality jettisoned its alternative defence about the
unconstitutionality and unlawfulness of the claim by the Fund.
[48]
Barkhuizen v Napier
[2007]
ZACC 5
;
2007 (5) SA 323
(CC);
2007 (7) BCLR 691
(CC) at paras 28-9.
[49]
Id at para 57. This consideration is
expressed in the maxim
pacta sunt
servanda.
[50]
Id.
[51]
See
Barkhuizen
above n 48 at para
73.
[52]
Clause 11.5 of the Fund Rules requires the following for an
amendment:
“(1) Subject to the approval of the Council and a two
thirds majority vote by the members who respond in writing
to a
request to vote on the matter, the Committee may at anytime amend
the Rules, provided that:
(a) the value of the Member’s Share prior to such amendment
shall not be reduced;
(b) the amendment is not inconsistent with the provisions of the Act
or of the Income Tax Act, 1962;
(c) the pensioners will be entitled to vote on amendments to the
rules which will affect their benefits;
provided further that the limitations in (a) above shall not apply
to amendments required to ensure that the Fund will be able
to meet
its obligations in terms of a certificate issued by the Actuary; and
provided further that any amendment to the Rules
affecting the
financial basis of the Fund shall be referred to the Actuary before
being adopted.
2) The Committee shall submit any amendment to the Rules to the
Registrar and the Commissioner in writing, for their approval.”
[53]
Section 7C provides the following:
“
(1) The object of a board shall be to
direct, control and oversee the operations of a fund in accordance
with the applicable laws
and rules of the fund.
(2) In pursuing its object the board shall—
(a)
take all reasonable steps to ensure
that the interests of members in terms of the rules of the fund and
the provisions of this
Act are protected at all times, especially in
the event of an amalgamation or transfer of any business
contemplated in section
14, splitting of a fund, termination or
reduction of contributions to a fund by an employer, increase of
contributions of members
and withdrawal of an employer who
participates in a fund;
(b) act with due care, diligence and good faith;
(c) avoid conflicts of interest;
(d) act with impartiality in respect of all members and
beneficiaries;
(e) act independently;
(f) have a fiduciary duty to members and beneficiaries in respect of
accrued benefits or any amount accrued to provide a benefit,
as well
as a fiduciary duty to the fund, to ensure that the fund is
financially sound and is responsibly managed and governed
in
accordance with the rules and this Act; and
(g) comply with any other prescribed requirements.”
[54]
High Court judgment above n 1 at para 53.
[55]
See
section 7C(2)(f) of the Act above n
53.
[56]
South African Local Authorities Pension Fund v
Msunduzi Municipality
[2015] ZASCA
172
;
2016 (4) SA 403
(SCA) at paras 31-3.
[57]
Royal Sechaba
above n 38 at para 12.
[58]
Ekurhuleni Metropolitan Municipality
above
n 7.
[59]
Id at para 33.
[60]
Section 167(6) provides:
“
National legislation or the rules of the
Constitutional Court must allow a person, when it is in the
interests of justice and
with leave of the Constitutional Court
(a) to bring a matter directly to the Constitutional Court; or
(b) to appeal directly to the Constitutional Court from any other
court.”
[61]
See
Paulsen
above
n 28.
[62]
Id at para 29.
[63]
First judgment at [17].
[64]
First judgment at [33].
[65]
Section 39(2) of the Constitution provides:
“
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.”
[66]
Fraser
above n
23 at para 40.
[67]
Robin Consolidated Industries Ltd. v
Commissioner for Inland Revenue
[1997] ZASCA 12
;
1997
(3) SA 654
(SCA) at 666F-G.
[68]
First judgment at [37].
[69]
Id at [20].