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[2013] ZAWCHC 170
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Gibson v Gibson and Another (1293/2012) [2013] ZAWCHC 170 (8 November 2013)
THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE HIGH COURT)
Case No: 1293/2012
In the matter between:
SANETTE GIBSON
APPLICANT
And
RORY GIBSON
FIRST
RESPONDENT
GLACIER FINANCIAL
SOLUTIONS (PTY) LTD
SECOND
RESPONDENT
Coram
: ROGERS J
Heard: 22 OCTOBER 2013
Delivered: 8 NOVEMBER 2013
______________________________________________________________
JUDGMENT
______________________________________________________________
ROGERS J:
The applicant seeks enforcement of the provisions of a
consent paper relating to an alleged pension interest of the first
respondent.
At the hearing the applicant was represented by Mr W
Pretorius and the respondent by Mr E Spamer. This case illustrates
how the
lack of care in drafting provisions of this kind can give
rise to considerable difficulty.
The decree of divorce incorporating the consent paper
was granted on 27 May 2003. The applicant and the respondent were
the plaintiff
and defendant respectively in the divorce action.
Clauses 1.5 and 1.6 of the consent paper provide as follows
(correcting for
obvious typographical errors) :
1.5 1.5.
1
Eiseres sal geregtig wees op een-helfte van die Verweerder se
pensioenbelang wat in die Sanlam Preservation Pension Fund,
verwysingnommer
1036177-R Gisbson belê is en ook geregtig wees
op een-helfte van die Verweerder se pensioenfonds wat namens
Verweerder deur
Sanlam in die Geldmark belê is.
1.6 1.6.1 Ten einde uitvoering
hieraan te gee magtig die partye hiermee onherroeplik die voormelde
Fonds om sy rekords, in ooreenstemming
met Artikel 7(8)(a)(ii) van
die Wet op Egskeiding te endosseer ten einde die bepalings hiervan te
inkorporeer.
1.6.2 Die Verweerder sal verplig
wees om Eiseres te vergoed vir die verlies in werklike terme, indien
enige, van die gedeelte van
die pensioen wat aan haar toegeken word
ingevolge hierdie bepaling vir die termyn tussen die datum van die
egskeiding en die daum
waarop die voordele aan haar toekom.
1.6.3 Eiseres sal
verplig wees om Verweerder te vergoed vir die waarde van die
belasting wat betaalbaar is op daardie
gedeelte van die
pensioenbelang wat haar toekom, vir welke doel sy die voormelde Fonds
hiermee magtig om die voormelde belasting
te verreken teen die bedrag
wat haar toekom.
1.6.4 Die Verweerder
sal nie geregtig wees om sy voormelde pensioenbelegging oor te dra
aan enige ander Fonds of enige
wysiging ten opsigte daarvan te maak
en/of aan te gaan of dit oor te plaas na ʼn ander Fonds sonder
die voorafverkreë
skriftelike toestemming van Eiseres nie.
Insgelyks sal die Verweerder nie geregtig wees om die bedrag wat in
die geldmark deur
Sanlam belê is op enige ander wyse te belê
sonder Eiseres se voorafverkreë skriftelike toestemming nie.’
I shall refer to the fund mentioned in clause 1.5.1 as
the SPPF. The consent paper described the SPPF as a ‘preservation
pension fund’. At the time the divorce was granted neither the
Pension Funds Act 24 of 1956
nor the Income Tax Act 58 of 1962
contained a definition of this expression. Prior to the amendments
brought about to the Income
Tax Act by Act 3 of 2008, the Income Tax
Act contained definitions for the expressions ‘pension fund’,
‘provident
fund’ and ‘retirement annuity fund’.
By way of Act 3 of 2008, and with effect from 22 July 2008,
definitions
were inserted into the Income Tax Act of ‘pension
preservation fund’ and ‘provident preservation fund’;
and the definitions of ‘pension fund’, ‘provident
fund’ and ‘retirement annuity fund’ were
simultaneously amended. From the statutory definition in the Income
Tax Act, one sees that the essential features of a ‘pension
preservation fund’ are that it is a registered pension fund
organisation (i) the members of which comprise former
members
of a ‘pension fund’ or ‘provident fund’
whose membership of the latter fund has terminated and who
upon
such termination elected to have lump sum benefits transferred to
the pension preservation fund; (ii) in which a member
is
entitled, prior to his retirement date in the pension preservation
fund, to make one withdrawal from the fund (which might
be his full
fund value, thus terminating his membership); (iii) and in which the
member, on reaching his retirement date, is
entitled to a retirement
benefit, of which up to one-third may be commuted to a single
payment and the rest of which must be
paid in the form of an
annuity. Pension funds of this kind existed prior to 2008 but they
were not separately distinguished for
purposes of the Income Tax
Act.
It would appear that the SPPF was a ‘pension
preservation fund’ of the kind just described. The first
respondent’s
investment confirmation from Sanlam, a copy of
which is annexed to the founding affidavit, reflects an investment
date of 24
October 2002 (presumably the date on which the first
respondent’s membership of a pension fund associated with his
employment
terminated); an opening net investment amount of
R388 378,42; a planned retirement date of 19 June 2008 (his
55
th
birthday); and an election to invest the funds in a
money market fund and a dollar hedge fund. The first respondent was
permitted
to make one taxable
ad hoc
withdrawal from the SPPF
prior to his selected retirement date. On retirement the first
respondent was obliged to purchase a
life annuity with the remaining
funds, though one-third of the fund value could be commuted at that
stage into a lump sum.
According to the first respondent’s answering
affidavit, he exercised his right to make an
ad hoc
withdrawal about two months prior to the divorce, pursuant to which
he received a sum of R107 195 on 20 March 2003. The
first
respondent says that because of this withdrawal and because the SPPF
suffered a capital loss between October 2002 and May
2003, his net
investment in the SPPF as at the date of divorce (27 May 2003) was
only R194 211,17.
Upon reaching his selected retirement date of 19 June
2008 (about five years after the divorce) the first respondent
utilised
the full investment value as at that date to purchase an
annuity. Mr Pretorius said that on his understanding the first
respondent
was not permitted to make the one-third withdrawal as he
had already taken an earlier
ad hoc
cash benefit. This does
not seem to me to accord with the description of the SPPF in the
investment confirmation annexed to the
founding affidavit (though
its rules have not been placed before me). As I read that document
(as well as the subsequent definition
of ‘pension preservation
fund’ inserted into the Income Tax Act), the first respondent
was entitled to make one pre-retirement
withdrawal (which he did in
March 2003) and upon reaching his retirement age to commute
one-third of his retirement benefit to
a lump sum. Be that as it
may, the position is that upon reaching his selected retirement date
on 19 June 2008 the first respondent
used the full fund value to
purchase a life annuity. At that date he ceased to be a member of
the SPPF and instead became the
holder of an annuity policy issued
by an insurer (Sanlam).
For reasons which are not explained, the parties took
no steps to give effect to clause 1.6.1 of the consent paper by
notifying
the SPPF that its records were to be endorsed to reflect
the terms of the consent paper. The applicant appears to have made
no
enquiries about the first respondent’s alleged pension
interest until March 2011 when her representative directed a request
to Sanlam. On 5 April 2011 Sanlam replied that the
Pension Funds Act
did
not permit any deduction to be made from a life annuity, and
that the terms of the consent paper were a matter between the
applicant
and the first respondent. The applicant’s
representative requested certain information from Sanlam but the
latter replied
that it could not provide information without the
first respondent’s authority. In May 2011 the applicant’s
attorney
spoke with the first respondent personally and later sent a
letter to the latter’s attorneys requesting the first
respondent’s
authority for the applicant to obtain information
from Sanlam. Despite a reminder dated 23 May 2011 nothing further
was heard
from the first respondent or his attorneys.
The present application was launched on 26 January
2012. Because the applicant had not been able to obtain information
from Sanlam
or the first respondent, she was not able to provide
precise information as to the value of the first respondent’s
alleged
pension interest in the SPPF as at the date of the divorce.
Based on the investment confirmation which she annexed to her
founding
affidavit, she said that the net value in the SPPF as at 27
May 2003 was not likely to have been less than the opening net
investment
value of R388 378,42 as at 24 October 2002, and on
this basis she sought payment of half of that sum, R194 189,21,
together with a CPI adjustment as from 27 May 2003 until 19 June
2008, giving a total of R261 965,15 on which she sought
mora
interest as from 19 June 2008. The legal basis for the CPI
adjustment was not explained in the founding papers.
In the answering papers the first respondent mentioned
the pre-divorce capital withdrawal he had made from the SPPF and the
capital
loss which the SPPF had sustained, and alleged that the
investment value as at the date of divorce was only R194 211,17.
He said in his affidavit that the applicant was entitled to 50% of
that amount, namely R97 105,58. He pointed out that the
applicant was responsible for the payment of any tax associated with
that sum. He stated that he was willing to make payment
to her of
R97 105,58 less the necessary tax deduction. He alleged that he
had been unable to ascertain what the tax deduction
was.
For purposes of argument Mr Pretorius accepted that the
value of the first respondent’s interest in the SPPF as at 27
May
2003 was R194 211,17.
Various important amendments were made to
s 37D
of
the
Pension Funds Act during
2007 and 2008. Those amendments were
not in force at the time the divorce was granted on 27 May 2003. At
the time the parties
concluded the consent paper in May 2003, they
and their advisers were plainly under the impression that the first
respondent’s
interest in the SPPF was a pension interest to
which the provisions of s 7(8) of the Divorce Act applied. They
remained
under that impression when they filed their affidavits in
the present proceedings. They evidently believed that, at the time
the consent paper was concluded and the divorce granted, the first
respondent had a ‘pension interest’ as defined in
s 1(1)
of the Divorce Act; that such interest thus formed part of the first
respondent’s estate for purposes of the
divorce; and that
pursuant to the divorce order and notification to the SPPF, the
latter would be obliged, when in due course
pension benefits accrued
to the first respondent, to pay 50% of the ‘pension interest’
to the applicant. Because
s 37D
of the
Pension Funds Act had
not yet been amended so as to deem the accrual of benefits to the
first respondent to occur at the date of divorce, the parties
would
have expected that the SPPF would only become obliged to pay the
half-share to the applicant on some future date when the
first
respondent became entitled to benefits in terms of the rules of the
SPPF. (In terms of amendments affected to
s 37D
of the
Pension
Funds Act in
2007 and 2008 the portion of the ‘pension
interest’ assigned to the non-member spouse in terms of a
divorce decree
was deemed to accrue to the member spouse on the date
of the divorce decree and became payable to the non-member at that
time.
This meant that the non-member spouse no longer had to wait
what might be many years before pension benefits under the rules of
the pension fund accrued to the member spouse. The amendment to this
effect was initially enacted in a new para (e) added to
s 37D(1)
with effect from 13 September 2007. With effect from 1 November 2008
the said para (e) was deleted and a similar provision (together
with
other amendments) was inserted by way of new sub-sections (4) to (6)
of
s 37D.)
Mr Pretorius submitted in written and oral argument
that the parties and their advisers had been under a misapprehension
when
the consent paper was concluded and when they filed their
affidavits in the current proceedings. I think he is right. Section
7(7) of the Divorce Act provides that in the determination of the
patrimonial benefits to which the parties to any divorce action
may
be entitled, the ‘pension interest’ of a party shall,
subject to certain qualifications not here relevant, be
deemed to be
part of that person’s assets. This deeming is necessary,
because the ‘pension interest’ defined
in s 1(1) of
the Act is an interest which a member of a pension fund has in
benefits which may accrue in the future but
which does not yet
constitute an asset vesting in his estate. It is only in respect of
such a ‘pension interest’
that a court may make an order
in terms of s 7(8). The order contemplated by s 7(8) is an
order that the whole or part
of the ‘pension interest’
as quantified in the definition of that expression must be paid by
the pension fund to
the non-member when pension benefits accrue to
the member. If pension benefits have already accrued to the member
prior to the
divorce, the accrued benefit may constitute an asset in
the member’s estate but it is not a ‘pension interest’
as defined in s 1(1). The court could thus not in terms of
s 7(8) make an order binding on the pension fund in respect
of
such an accrued pension benefit. The parties would, though, be at
liberty to make an arrangement in their consent paper, operative
inter se
, regarding the payment of money from one to the
other in respect of the accrued pension benefit. This appears to be
the effect
of two leading judgments of the Supreme Court of Appeal,
namely
Old Mutual Life Assurance Co (SA) Limited & Another v
Swemmer
2004 (5) SA 373
(SCA) paras 19-20 and
Eskom Pension
and Provident Fund v Krugel & Another
2012 (6) SA 143
(SCA)
paras 11-12.
The definition of ‘pension interest” in
s 1(1) is thus critical when it comes to orders that may
competently
be made in terms of s 7(8) of the Divorce Act (as
read, since 13 September 2007, with the relevant provisions of
s 37D
of the
Pension Funds Act). The
definition, to which there have been
no amendments since it was inserted into the Divorce Act in 1989,
reads thus (the underlining
is mine):
‘ “
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
;
(b) is a member of a
retirement annuity fund which was
bona fide
established for
the purpose of providing life annuities for the members of the fund,
and which is a pension fund, means the total
amount of that party’s
contributions to the fund up to the date of the divorce, together
with a total amount of annual simple
interest on those contributions
up to that date, calculated at the same rate as the rate prescribed
as at that date by the Minister
of Justice in terms of section 1(2)
of the Prescribed Rate of Interest Act, 1975 (Act No. 55 of 1975),
for the purposes of that
Act;’
Sub-section (6) was, by way of s 16(c) of Act 22
of 2008, inserted into
s 37D
of the
Pension Funds Act with
effect from 1 November 2008. This sub-section, which can be viewed
as an indirect modification of the definition of ‘pension
interest’ in the Divorce Act, reads thus:
‘
Despite
paragraph (b) of the definition of “pension interest” in
section 1(1)
of the
Divorce Act, 1979
, the portion of the pension
interest of a member of a pension preservation fund or provident
preservation fund (as defined in the
Income Tax Act, 1962), that is
assigned to a non-member spouse, refers to the equivalent portion of
the benefits to which that
member would have been entitled to in
terms of the rules of the fund if his or her membership of the fund
terminated on the date
on which the decree was granted.’
This sub-section was not in force either at the time of
the divorce in May 2003 nor when the first respondent’s
interest in
the SPPF terminated in June 2008.
The first respondent was not a
member of a retirement annuity fund at the date of the divorce. Para
(b) of the definition of ‘pension
interest’ was thus not
applicable.
1
As to para (a) of the definition,
the SPPF was a ‘pension fund’ as defined in the Pension
Fund Act. However, para
(a) is effectively limited to occupational
pension funds, ie pension funds in which the member spouse is an
in-service employee,
because it is only in respect of such a fund
that the member would become entitled to benefits ‘on account
of his resignation
from his office’. A pension preservation
fund is a fund in which is invested the lump sum to which a person
has become
entitled by virtue of the termination of his membership
of an occupational pension fund, the idea being to preserve and
enhance
the lump-sum benefit until the person reaches an ordinary
retirement age (which he might typically select as being 55, 60 or
65), unless he prefers in the meanwhile to withdraw some or all of
his investment as a lump sum (something he can do once only).
The
member of a pension preservation fund does not have an entitlement
to benefits which will accrue to him by virtue of his
resignation
from office. In that respect, the interest is similar to the
deferred pension of a person whose status as an in-service
member of
a pension fund has come to an end by virtue of the termination of
his employment. As in the case of the interest of
a deferred
pensioner (see the
Eskom
case
supra
),
the interest of a member of a pension preservation fund is not a
‘pension interest’ to which any value can be ascribed
under para (a) of the definition.
As noted, the new sub-section (6) of
s 37D
of the
Pension Funds Act has
altered the position (with
effect from 1 November 2008) so that effectively the definition of
‘pension interest’
in the case of a member of a pension
preservation fund means ‘the equivalent portion of the
benefits to which that member
would have been entitled to in terms
of the rules of the fund
if
his or her membership of the fund terminated
on
the date on which the decree was granted’ (my emphasis) –
this overcomes the difficulty that the member of a pension
preservation fund does not become entitled to any benefits ‘on
account of his resignation from his office’. Unfortunately,
however, this new sub-section was not in force at any relevant time.
I thus agree with Mr Pretorius’ argument that the
terms contained in clauses 1.5 and 1.6 of the consent paper rested
on
a mistaken assumption by the parties that
s 7(8)
applied to
the first respondent’s interest in the SPPF, and that the
affidavits filed in the present proceedings perpetuated
the
misapprehension. The question is what to do. In his heads of
argument Mr Pretorius contended that the only benefits which
have
accrued or will accrue to the first respondent pursuant to his
interest in the SPPF are the monthly payments in terms of
the
annuity purchased on 19 June 2008. The extent of these payments is
to some extent a matter within the first respondent’s
discretion, because he can elect to take a lesser or greater monthly
amounts within certain parameters. Mr Pretorius’ argument
in
his written submissions was that the applicant was entitled to 50%
of every payment which has been made or will in the future
be made
to the first respondent in terms of the annuity policy. This was
also the contention advanced by him orally in his opening
address.
At that stage I was leaning towards the view that the applicant was
entitled to 50% of the fund value as at the date
of the divorce.
In a strange turn of events, Mr Pretorius informed me
after the morning tea adjournment that he had taken instructions and
that
his client now wanted to be paid 50% of the fund value as at
the date of the divorce, together with interest as from 19 June
2008, but that his colleague for the respondent, Mr Spamer, was
going to contend that Mr Pretorius’ initial argument was
correct and that the first respondent should only have to pay 50% of
each monthly annuity payment as it was paid to him.
Unfortunately, it appears to me that both of these
positions suffer from the same essential defect, namely an attempt
to superimpose
on clauses 1.5 and 1.6 of the consent paper an
arrangement of expediency which happens to suit one party or the
other but which
is not in accordance with the consent paper. What
clauses 1.5 and 1.6 envisaged was that, purportedly in accordance
with
s 7(8)
of the
Divorce Act, the
first respondent’s
supposed ‘pension interest’ in the SPPF would be
calculated as at the date of the divorce,
with 50% of such value
being assigned to the applicant; that the SPPF (not the first
respondent) would pay the said amount to
the applicant when benefits
accrued to the first respondent; that the SPPF would be authorised
to deduct from the amount payable
in due course to the applicant the
tax attributable to that portion of the pension interest; and that
the only financial commitment
undertaken personally by the first
respondent was to compensate the applicant for the loss in real
terms, if any, which the value
of her assigned share of the pension
interest suffered between the date of the divorce and the date on
which she became entitled
to receive the money from the SPPF. (Even
this latter personal obligation of the first respondent appears to
be misconceived,
because if
s 7(8)
applied the Fund would have
to pay the 50% interest calculated at the date of divorce,
regardless of a subsequent decrease in
the value of the overall
pension interest. Perhaps this compensation obligation was designed
only to meet the somewhat unlikely
eventuality that by the time
pension benefits in the SPPF accrued to the first respondent the
entire fund value was less than
the applicant’
s 50%
share as
at the date of the divorce.) As I have explained, the first
respondent’s ‘pension interest’ in the
SPPF had no
value in terms of the definition of ‘pension interest’
in
s 1(1)
of the
Divorce Act, because
no amount would ever
become payable to him by the SPPF on account of ‘resignation
from his office’.
If this is the effect of clauses 1.5 and 1.6, neither
of the positions adopted by the parties can be said to reflect a
proper
interpretation and application of the decree of divorce as
read with the consent paper. Both the applicant and the first
respondent
adopt a position in which the consent paper has to be
read as imposing a personal obligation on the first respondent, not
a statutory
obligation on the relevant pension fund. On the first
respondent’s latest position, this personal obligation relates
not
to the interest which the first respondent had in the SPPF at
the date of the divorce but to his entitlement in terms of an
annuity
policy purchased in June 2008. However, the annuity insurer
(Sanlam) is not obliged to make monthly payments to the applicant.
Indeed, unless
s 7(8)
of the
Divorce Act is
operative, Sanlam
would be prohibited by
s 37A(1)
of the
Pension Funds Act from
paying a portion of each month’s annuity directly to the
applicant instead of to the first respondent. Furthermore, the
monthly annuity payments from Sanlam would be the product of the
full fund value over the entire period of the first respondent’s
investment in the SPPF and in the ensuing annuity policy, meaning
that the applicant would effectively benefit from investment
return
subsequent to the date of divorce rather than what was clearly
intended in the consent paper, namely a pension interest
calculated
in accordance with the
Divorce Act as
at the date of divorce.
One would come closer, in practical effect, to the
intention of the parties by saying (as Mr Pretorius eventually asked
me to
say) that the first respondent was required, when he reached
his selected retirement date in the SPPF, to pay the applicant 50%
of his fund value as at the date of the divorce. Mr Pretorius for
the applicant accepted that 50% of that fund value as at 27
May 2003
amounted to R97 105,58. If the first respondent was personally
obliged to pay that sum (or the said amount after
deduction of tax)
to the applicant on 19 June 2008 (his selected retirement date in
the SPPF), one might expect that he would
also be obliged to pay
mora
interest at 15.5% from 19 June 2008 to date of payment
(such interest, if payable on the full amount of R97 105,58,
would
now exceed R80 000). In his answering affidavit, made at
a time when the parties were both still under a misapprehension
regarding the applicability of the legislation, the first respondent
tendered to pay the applicant the capital sum of R97 105,58
less the tax to be borne by the applicant but did not tender
interest, and in argument Mr Spamer contended that the first
respondent
should not be ordered to pay
mora
interest. The
question of tax raises difficulties of its own, because typically
tax becomes payable when a
pension fund
pays a benefit. If
s 7(8)
of the
Divorce Act is
inapplicable and if clauses 1.5
and 1.6 of the consent paper merely reflect a payment obligation
between the parties
inter se
, it is not clear on what basis
tax would be payable at all (unless the first respondent’s
payment to the applicant was
of a revenue nature, in which case the
tax would have to be borne by the applicant, not the first
respondent).
The difficulty with Mr Pretorius’ most recent
position is that it requires one to interpret clauses 1.5 and 1.6 as
imposing
an obligation on the first respondent personally to make a
substantial capital payment to the applicant upon reaching his
selected
retirement date. However, that is not what clauses 1.5 and
1.6 say; those clauses envisage that the capital payment will be
made
to the applicant by the SPPF.
Section 7(8)
of the
Divorce Act
is
framed as it is in part because one would not ordinarily expect
the member spouse to be able to afford to pay from his own resources
a 50% share (or more) of his ‘pension interest’ as at
the date of the divorce. In this particular case, the first
respondent did not on 19 March 2008 become entitled to receive from
the SPPF a capital sum which would have enabled him to pay
the
applicant R97 105,58. It is possible that in the event the
first respondent had sufficient other resources to do so
but there
is no evidence before me at this stage to indicate that, if the
non-applicability of
s 7(8)
had been appreciated by the parties
when they negotiated the consent paper, the first respondent would
nevertheless have agreed
personally to make a substantial capital
payment to the applicant when he turned 55. He may have agreed to
that course; or he
may have said that he was only willing to pass on
half of each monthly annuity payment after turning 55; or the
parties may have
agreed that the applicant would be compensated in
some other way altogether (for example, by awarding her the whole or
a greater
share of the net proceeds of the matrimonial home, rather
than the 50/50 split agreed in clause 1.1).
Although I may have a view as to what would be fair in
all the circumstances, I cannot in good conscience say that either
of the
solutions offered to me by the parties represents a proper
interpretation of clauses 1.5 and 1.6 of the consent paper. The
unpalatable
truth is that clauses 1.5 and 1.6 were drafted under a
misapprehension and thus cannot sensibly be applied to the facts as
they
actually existed. It is not a permissible process of
interpretation, where the provisions agreed upon by the parties
cannot sensibly
be applied, to adopt an alternative solution just
because it seems fair. Of course, an unforeseen eventuality might be
met by
a tacit term but then one would need to be confident that if
the problem had been raised by an officious bystander both parties
would unhesitatingly have given the same reply as to what would
happen in the posited eventuality. I cannot on the material before
me say that the parties would have unhesitatingly agreed upon the
same solution.
In reaching my conclusion I have not overlooked para 15
of the
Eskom
case
supra
. That was a case where the
member spouse had become a deferred pensioner in an occupational
pension fund prior to the granting
of the divorce. The Supreme Court
of Appeal held that the benefits contemplated in para (a) of the
definition of ‘pension
interest’ in
s 1(1)
of the
Divorce Act had
accrued to the member spouse prior to the divorce in
consequence of his resignation from office and that the appellant
pension
fund was thus correct in saying that the relevant provision
of the consent paper was not binding on it and could not be endorsed
against its records. Para (b) of the definition of ‘pension
interest’ was held to be inapplicable (see para 14 of
the
judgment). In para 15 Maya JA made the following concluding remark:
‘
Finally,
it should be mentioned that this finding does not leave the first
respondent [the non-member spouse] without remedy. The
divorce
settlement agreement between her and Krugel (who undertook to give on
demand any assistance needed in connection with its
enforcement)
remains binding. It is therefore open to her to claim her share of
his deferred pension benefit when it is claimed
by him after reaching
the age of 55 years.’
It is this passage which perhaps inspired Mr Pretorius
to adopt the initial position he did in his opening address, namely
that
the applicant was entitled to half of each annuity payment as
it was made by the insurer to the first respondent as from 19 June
2008. I have already given my reasons for saying that such an
outcome cannot be reached as a matter of interpretation of the
consent paper. Maya JA’s observation in para 15 of
Eskom
is
an
obiter dictum.
Maya JA did not say whether, when Krugel
(the member spouse) reached the age of 55, the non-member spouse
would be entitled to
make her claim against the pension fund or
against Krugel personally. The former view seems inconsistent with
the court’s
earlier analysis of the law. If the latter view
was the one Maya JA had in mind, the court did not explain how the
provisions
of the consent paper in that particular case could be
interpreted so as to require the member spouse, Krugel, to be
personally
responsible for making any payments to the applicant or
why the terms of the consent paper (which would have been intended
to
freeze the non-member spouse’s share of the ‘pension
interest’ as at the date of the divorce) should entitle
her to
any particular portion of the monthly annuity payments which might
after the passing of many years become payable to Krugel.
I do not
think para 15 of
Eskom
embodies a general legal principle
applicable to all cases. It was an
obiter
observation made
with reference to the facts of that particular case.
I have also considered the judgment of Levinsohn DJP in
Protektor Preservation Pension Fund v Bellars & Others
2009
(4) SA 455
(D), though counsel in the present matter did not refer
me to it nor place reliance on it. The
Protektor
case was
decided prior to
Eskom
and I doubt whether its reasoning can
survive the
Eskom
judgment. The case was also unusual in that
the pension fund, far from opposing compliance with the terms of the
divorce order,
was actively assisting the divorced parties to
implement their agreement and was indeed the applicant for relief.
Unsurprisingly,
there was no opposition, and the court thus did not
have the benefit of full argument.
Reverting to the present case, it is perhaps possible,
now that the precise problem is appreciated, that one or both of the
parties
would be able to place before the court evidence of
background and surrounding circumstances (ie circumstances
prevailing or
in mind at the time they negotiated the consent paper)
to persuade a court to find that there is a tacit term to cover the
eventuality
of
s 7(8)
being inapplicable. If that cannot be
done, the applicant might well be entitled to apply for a variation
of the decree of divorce
(which incorporates the consent paper).
Rule 42(1)(c)
states that a court may upon the application of an
affected party rescind or vary an order or judgment granted as the
result
of a mistake common to the parties. Even though the divorce
was granted more than 10 years ago, it is only now that the
difficulty
has come to light. If the parties cannot agree upon a
re-adjustment of the terms of the consent paper to take account of
the
common mistake which they made in May 2003, a court might well
be persuaded that the proprietary terms of the divorce should be
reconsidered.
I thus conclude, with considerable regret, that I
cannot grant an order on the current application. Since neither of
the parties
identified the real problem in their affidavits, and
since this judgment does not vindicate the arguments of either side,
I think
the fairest course would be to make no order as to costs. I
consider, further, that the applicant should be granted leave to
re-apply for relief upon supplemented papers (whether by way of
providing further evidence as to the interpretation of the consent
paper or for a variation of the consent paper in terms of
rule 42).
My granting of such leave is not intended to determine any questions
which might arise in relation to the scope and applicability
of
rule
42
, a question on which I was not addressed.
This application was previously enrolled for hearing on
7 June 2012. On that date it was postponed
sine die
with
wasted costs to stand over for later determination. At the hearing
before me on 22 October 2013 counsel could not agree on
the
circumstances in which the matter came to be postponed. I thus
requested the parties to file affidavits. I have read the
affidavits
filed by attorneys who dealt with the matter in May and June 2012.
It seems to me from the correspondence that the
postponement arose
from a belated attempt by the applicant to obtain discovery in
motion proceedings and by a failure on the
part of the applicant’s
attorneys to deal timeously with the first respondent’s
attorneys’ request for clarity
as to the fate of the scheduled
hearing. The result was that the first respondent’s attorneys
briefed counsel who filed
heads of argument timeously on 31 May 2012
and who had to be kept on brief until the day before the scheduled
hearing. Subsequent
to the postponement nothing more was done in
connection with the discovery application. I thus think that the
applicant should
bear the costs wasted by the postponement of 7 June
2012.
In conclusion, I express the sincere wish that the
parties reach an amicable and fair solution without the need for
further proceedings.
I thus make the following order:
[a] The application is dismissed with no
order as to costs, save that the applicant shall pay the first
respondent’s
wasted costs arising from the postponement of 7
June 2012.
[b] The applicant is granted leave to
re-apply on the same papers, supplemented as needs be, for the
enforcement or variation
of the consent paper which was incorporated
into the decree of divorce granted on 27 May 2003.
______________________
ROGERS J
APPEARANCES
For Applicant: Mr W Pretorius
Instructed by:
Hannes Pretorius Bock & Isaacs
Somerset West
For First Respondent: Adv E Spamer
Instructed by:
Geldenhuys Inc
Vredenburg
1
Neither
of the parties' counsel suggested in argument that the SPPF was a
retirement annuity fund as contemplated in para (b)
of the
definition of 'pension interest'. A pension preservation fund is
certainly not a retirement annuity fund as ordinarily
understood. A
major difference between a retirement annuity fund and a pension
preservation fund is that in the case of a pension
preservation fund
the member has an opportunity, prior to reaching his retirement
date, to withdraw some or all of his pension
interest as a lump sum.
If this right is exercised in full, the member will never receive an
annuity. An extensive interpretation
of para (b) so as to include a
pension preservation fund would also give rise to difficulties in
applying the quantification
formula in para (b). The formula
requires one to total the contributions and add interest thereon at
the specified rate from
the date each contribution was made up to
the date of the divorce. This formula presupposes that the
contributions cannot be
withdrawn, which is true for a conventional
retirement annuity fund but not for a pension preservation fund. The
formula cannot
readily accommodate the case where the member spouse
of a pension preservation fund has made a substantial withdrawal
from the
fund prior to the date of divorce.