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[2018] ZASCA 126
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Sentinel Retirement Fund and Another v Masoanganye (1003/2017) [2018] ZASCA 126 (27 September 2018)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 1003/2017
In
the matter between:
SENTINEL RETIREMENT
FUND
FIRST
APPELLANT
GARY
MEYER
SECOND
APPELLANT
and
RICHARD
MASOANGANYE
FIRST
RESPONDENT
LINDA MARTIN
NDEBELE
SECOND
RESPONDENT
NATIONAL DIRECTOR OF
PUBLIC PROSECUTIONS
THIRD
RESPONDENT
Neutral
citation:
Sentinel
Retirement Fund v Masoanganye
(1003/2017)
[2018] ZASCA 126
(27 September 2018)
Coram:
Lewis,
Cachalia, Saldulker, Mbha and Makgoka JJA
Heard:
4
September 2018
Delivered:
27
September 2018
Summary:
Payment
of a pension benefit to a curator bonis appointed in terms of
restraint order issued under the
Prevention of Organised Crime Act
121 of 1998
– whether precluded by
s 37A(1)
of Pension Funds
Act 24 of 1956.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Johannesburg (
Makume
J
sitting
as court of first instance):
1 Save as is set out
below the appeal is dismissed with no order as to costs;
2 The order of the high
court is amended as follows:
(a)
The applications in Parts A and B are dismissed;
(b)
Para 54.2 of the order is set aside and the following is substituted
in its place:
‘
The First
applicant is ordered to pay the first and third respondents’
costs of the urgent application.’
(c)
Para 54.4 of Part B of the order is amended to read:
‘
The first
applicant is ordered to the pay the pension benefits of the second
respondent into a special bank account designated for
this purpose by
the first respondent.’
(d)
Para 54.5 of the order is set aside and the following is substituted
in its place:
‘
The First
applicant is ordered to pay the costs of the first and third
respondents.’
(e)
A copy of this order must be served on the second respondent
forthwith.
JUDGMENT
Cachalia
JA (
Lewis,
Saldulker, Mbha and Makgoka JJA
concurring)
[1]
Section 37A(1) of the Pensions Fund Act 24 of 1956 (‘the PFA’)
protects any benefit or right to any benefit provided
for in the
rules of a registered fund from attachment or being subjected to any
form of execution against a judgment or order of
a court of law. The
narrow issue that arises in this appeal is whether the payment of a
member’s benefit to a curator bonis
pursuant to a restraint
order in terms s 26 of the Prevention of Organised Act 121 of 1998
(‘POCA’), falls foul of
this protection. The pension fund
contends that it does. The curator bonis and the National Director of
Prosecutions (‘the
NDPP’) assert the opposite. The high
court ruled in their favour.
[1]
The pension fund appeals to this court with its leave.
[2]
Some background is necessary. The first appellant, Sentinel, is a
pension fund (the Fund), and the second appellant, Mr Gary
Meyer, its
legal manager. Mr Meyer deposed to the papers on the Fund’s
behalf. The second respondent, Mr Linda Martin Ndebele,
is a member
of the Fund. In 2014, he terminated his services with his employer
and his withdrawal benefit accrued to him. He thus
became entitled to
a lump sum benefit equal to his fund credit. On 19 June 2015, he
elected to have his withdrawal benefit paid
to him in terms of the
Fund’s rules. He remains a member of the Fund until the benefit
is paid, but is not party to the present
dispute.
[3]
The third respondent is the NDPP. It prosecuted Mr Ndebele and
succeeded in having him convicted in the high court on racketeering
charges in contravention of POCA on 21 February 2011. The court found
that he had formed a criminal enterprise with another person
and had
benefitted from the illegal sales of electricity to Eskom to the
value of R 8.9 million. His appeal against this conviction
is
pending.
[4]
Shortly after Mr Ndebele’s conviction, on 9 March 2011, the
NDPP obtained a provisional restraint order, coupled with
a rule
nisi, against him in terms of s 26 of POCA. The order required
disclosure and surrender, of his ‘realisable property’
and prohibited any dealing with it. The rule was confirmed on 31 May
2011. In terms of clause 1.6 of the restraint order, the first
respondent, Mr Richard Masoanganye, was appointed curator bonis
subject to the provisions of the
Administration of Estates Act 66 of
1965
, and the supervision of the Master of the High Court. Clause 1.7
authorised the curator to take control of Mr Ndebele’s property
and to administer it. At issue here is whether the curator’s
authority extends to requiring Mr Ndebele’s pension pay-out
to
be paid to the curator once Mr Ndebele has elected to receive his
pay-out and ceases to be a member of the fund.
[5]
I shall consider this question in due course. But first it is
necessary to understand the genesis of the dispute in the high
court.
On 8 June 2015 the curator informed the Fund that it considered Mr
Ndebele’s pension benefit realisable property once
he ceases to
be a member, and requested his banking account details. Mr Meyer, on
behalf of the Fund, took the view that
s 37A
of the PFA protected
this benefit from being paid to the curator and also that Mr
Ndebele’s bank account details were confidential
and could not
be disclosed to a third party.
[6]
The Fund then approached the Gauteng Division of the High Court,
Johannesburg to interdict the curator from attaching Mr Ndebele’s
pension benefit and to obtain a declaratory order that the benefit
may not be attached as realisable property in terms of the restraint
order. It also sought certain alternative and ancillary forms of
relief, which are not relevant for present purposes. In its answering
affidavit resisting the relief claimed, the curator said that he did
not wish to attach the pension benefit in the hands of the
Fund; he
only wanted information pertaining to Mr Ndebele’s bank
accounts so that steps could be taken to prevent the unlawful
dissipation of the money once it was paid to him. In addition, the
curator maintained that the Fund’s cause of action was
misconceived because it had lost sight of the fact that should any
monies be paid to him in this capacity, it would remain in
Mr Ndebele’s ownership and be held by the curator in trust
in accordance with the provisions of the
Administration of Estates
Act.
[7
]
It appears that the dispute over whether the restraint order
authorised the curator to demand Mr Ndebele’s bank account
details fell away in the high court and was not pursued in this
court. I therefore need not say anything further on this aspect.
The
real issue is whether the Fund is entitled to resist Mr Ndebele’s
pension fund benefit being paid into a bank account
under the
curator’s control on the ground that
s 37A(1)
of the PFA
prohibits this.
Section
37A(1)
of the PFA
[8]
Pension benefits are protected as a matter of social security policy.
Sections 37A
and
37D
thus limit the circumstances under which
deductions or reductions may be effected from a benefit.
[2]
Under
s 37B
, for example, a benefit payable in terms of the rules of
a fund does not fall into an insolvent estate and may not be attached
or appropriated by the trustee of the insolvent estate or by
creditors. Another instance is that a lump sum benefit payable upon
a
member’s death does not usually form part of the deceased
estate but must be distributed equitably in terms of
s 37C
among the
deceased’s dependants. It cannot be attached by the deceased’s
creditors.
[9]
Similarly,
s 37A(1)
,
[3]
with
which we are concerned, explicitly protects a ‘benefit . .
. or right to such benefit’ from ‘being
reduced,
transferred or otherwise ceded, or being pledged or hypothecated,
or
liable to be attached or subjected to any form of execution under a
judgment or order of a court of law
. . . .’ (emphasis added). Deductions are permitted only under
the provisions of the Income Tax Act 58 of 1962 and the
Maintenance
Act 99 of 1998
, and in accordance with
s 37D.
Section 37A(3)
provides
for some exceptions regarding the settlement of certain debts, which
have no bearing on this appeal.
[4]
This raises the question whether a restraint order issued under POCA
relating to the property of a defendant constitutes an ‘attachment’
or ‘any form of execution under a judgment or order of a court
of law’ as envisaged in
s 37A(1)
of the PFA.
[10]
Because pension benefits are protected in accordance with social
security policy, the language used in
s 37A(1)
must be construed
broadly to support this purpose. An ‘attachment’, in
ordinary legal parlance, is the taking of property
into the actual or
constructive possession of a court of law, and ‘execution’,
in this context, the enforcement of
a court order or judgment.
[5]
[11]
A restraint order in terms of
s 26
of POCA may prohibit any person
from ‘dealing in any manner with any property to which the
order relates’.
[6]
The
order with which we are concerned prohibits any dealing with the
property and also requires disclosure and surrender of the
property
to a curator bonis under the supervision of the court. So, once the
order is executed and the curator bonis takes possession
of the
property there can be little doubt that the restraint constitutes
both an attachment and a form of execution under an order
of a court
of law within the meaning of
s 37A.
And therefore falls within the
section’s protective cloak.
[7]
[12]
This accords with what was said in
Van
Heerden & another v National Director of Public Prosecutions &
another
[8]
where the high court said that a restraint order granted under
s 26
of POCA ‘may well be viewed as a form of execution . . . within
the meaning of
s 37(A)(1)
’.
[9]
It reasoned as follows: The purpose of a restraint order is to
preserve property pending a possible confiscation order in terms
of
s
18
of POCA. Once a confiscation order is made, the high court may
order the restrained property to be realised in terms of
s 30.
And
because a pension benefit cannot be realised pursuant to a
confiscation order, it cannot be restrained in terms of
s 26
of
POCA.
[10]
[13]
But there is a more compelling reason why a benefit or right to a
benefit as contemplated in
s 37A(1)
cannot be made the subject of a
restraint order. In terms of
s 14
(1)
(a)
of POCA
a restraint order is made in respect of any realisable property
held
by the defendant concerned
.
[11]
(emphasis added.) This must mean that only realisable property over
which a defendant may claim a right of ownership may be restrained.
[14]
Now in terms of
s 1
of the PFA a ‘benefit’ in relation to
a fund, means any amount payable to a member or beneficiary in terms
of the rules
of that fund. But in terms of
s 5(1)
(b)
of the
PFA ‘all the assets, rights, liabilities and obligations’
of a fund are deemed to belong to the fund. A ‘benefit’
payable to a member is, therefore, deemed to belong to the fund and
not to the member. A member only has a personal right to the
benefits
due to him or her from the fund. It follows that a ‘benefit’,
as defined, belongs to the fund for so long
as it is in the hands of
the fund, and not to the member. It therefore cannot be subject to
any restraint under POCA.
[12]
The fact that a payment becomes due and has accrued to the member
does not change this.
[15]
The high court, however, found that once the benefit became due to be
paid to the member the Fund no longer ‘[had] any
title or hold
to such benefit’.
[13]
It
also said that his membership in the Fund ceases when he ‘becomes
entitled to receive the pay-out of the benefit’.
[14]
But the learned judge erred in assuming that once the benefit accrued
to the member it was no longer an asset of the Fund. Before
the
benefit became payable it was an asset of the Fund. It remained so
even after Mr Ndebele elected to receive it. All that happened
with
the election was that a corresponding liability was created in the
books of the Fund. This much, I think, is common cause
between the
parties.
[16]
This brings me to the real issue in this case; whether the restraint
order requires the Fund to pay the money into Mr Ndebele’s
personal banking account and not to an account designated by the
curator. The high court held that once a benefit is paid to the
member, and he ceases being a member, the protection afforded to the
benefit by
s 37A(1)
falls away and the pay-out then becomes part of
the general estate of the former member. For this conclusion the
learned judge
relied upon the judgments in
Van
Aarsten v Van Aarsten
[15]
and
Foit
v First Rand Bank BPK
.
[16]
I did not understand the Fund to take issue with the correctness of
this statement of the law.
[17]
[17]
That being so can there be any impediment to the Fund having to make
payment of the benefit to the curator instead of into
Mr Ndebele’s
bank account directly? I think not. A payment to a curator bonis does
not divest a defendant of the ownership
of the money. And there is
nothing in POCA or in the terms of the restraint order that suggests
the contrary. In this respect the
position of a curator bonis differs
from an executor, administrator, trustee in insolvency or liquidator.
The court appoints a
curator to take control and manage the property
of a person, who by law – in this case by virtue of the
restraint order –
may not do so. The curator steps into the
shoes of the defendant and administers the property in compliance
with the order. A payment
to the curator is, therefore, in truth and
effect a payment to the defendant himself.
[18]
It is akin to a payment made into a trust account of the defendant’s
attorneys.
[19]
And once the
payment is made to the curator it becomes the defendant’s
realisable property and subject to the same restraint
as it would
have been had it been paid directly to the defendant.
[18]
There are also pragmatic reasons for requiring a pay-out to be made
to the curator instead of to Mr Ndebele directly; there
seems no
sense for the law to oblige a Fund to pay him directly as he would
immediately have to effect a transfer to the curator
in accordance
with the terms of the restraint.
[20]
In fact, there is a very real risk that the money will be dissipated
instead of being transferred to the curator. The threat is
manifest
in this case as it appears that Mr Ndebele has attempted to obtain
payment to him directly by falsely informing
the Fund that the
criminal charges against him had been withdrawn.
[19]
I conclude, therefore, that the high court correctly dismissed the
Fund’s application to, in effect, interdict the pay-out
of Mr
Ndebele’s pension benefit to the curator.
[20]
What remains is costs. In dismissing the Fund’s application the
high court ordered costs against it and Mr Meyer on a
punitive scale
as between attorney and client. But its judgment is devoid of any
reasoning and the facts do not support this order.
There was no
proper reason for the court to depart from the ordinary rule, much
less to order Mr Meyer to be personally liable
for any of the costs.
[21]
In regard to the costs in this court, it should be borne in mind that
this court granted leave, no doubt in part, because the
judgment of
the high court contained incorrect statements of law pertaining to
when the protection of a benefit afforded by
s 37A(1)
ends. The
effect of those incorrect statements had potentially far reaching
consequences for the industry that went beyond the
dispute between
the parties in this case. The Fund was, therefore, obliged to appeal
to clarify this issue. The Fund has also obtained
some success in
this court by having the punitive costs orders in the high court set
aside. I would therefore relieve it from having
to pay the costs of
the appeal.
[22]
The following order is made:
1 Save as is set out
below the appeal is dismissed with no order as to costs;
2 The order of the high
court is amended as follows:
(a)
The applications in Parts A and B are dismissed;
(b)
Para 54.2 of the order is set aside and the following is substituted
in its place:
‘
The First
applicant is ordered to pay the first and third respondents’
costs of the urgent application.’
(c)
Para 54.4 of Part B of the order is amended to read:
‘
The first
applicant is ordered to the pay the pension benefits of the second
respondent into a special bank account designated for
this purpose by
the first respondent.’
(d)
Para 54.5 of the order is set aside and the following is substituted
in its place:
‘
The First
applicant is ordered to pay the costs of the first and third
respondents.’
(e)
A copy of this order must be served on the second respondent
forthwith.
________________
A
Cachalia
Judge
of Appeal
Appearances:
For
Appellant: P van der Berg SC (with him H Drake)
Instructed
by:
Shepstone
& Wylie Attorneys, Johannesburg
McIntyre
Van Der Post, Bloemfontein
For
First Respondent: R G Cohen
Instructed
by:
Anthony
Berlowitz Attorneys, Johannesburg
Lovius
Block, Bloemfontein
For
Third Respondent: W Coetzer (with him M S Mbatha)
Instructed
by:
The
State Attorney, Johannesburg
The
State Attorney, Bloemfontein
[1]
Case No: 22289/2015
.
[2]
Eskom Pension and Provident Fund v
Krugel
[2011] ZASCA 96
;
2011 (4) All SA 1
(SCA);
2012 (6) SA 143
(SCA) para 8.
[3]
Pension benefits not
reducible, transferable or executable
(1) Save to the extent
permitted by this Act, the Income Tax Act, 1962 (Act 58 of 1962),
and the
Maintenance Act, 1998
, no benefit provided for in the rules
of a registered fund (including an annuity purchased or to be
purchased by the said fund
from an insurer for a member), or right
to such benefit, or right in respect of contributions made by or on
behalf of a member,
shall, notwithstanding anything to the contrary
contained in the rules of such a fund, be capable of being reduced,
transferred
or otherwise ceded, or of being pledged or hypothecated,
or be liable to be attached or subjected to any form of execution
under
a judgment or order of a court of law, or to the extent of not
more than three thousand rand per annum, be capable of being taken
into account in a determination of a judgment debtor's financial
position in terms of section 65 of the Magistrates' Courts Act,
1944
(Act 32 of 1944), and in the event of the member or beneficiary
concerned attempting to transfer or otherwise cede, or to
pledge or
hypothecate, such benefit or right, the fund concerned may withhold
or suspend payment thereof: Provided that the fund
may pay any such
benefit or any benefit in pursuance of such contributions, or part
thereof, to any one or more of the dependants
of the member or
beneficiary or to a guardian or trustee for the benefit of such
dependant or dependants during such period as
it may determine.
[4]
‘
Pension
benefits not reducible, transferable or executable
(3) The provisions of
subsection (1) shall not apply with reference to anything done
towards reducing or obtaining settlement
of a debt-
(a)
which, in the case of a fund to which the Financial Institutions
Amendment Act, 1976 (Act 101 of 1976), applies, arose before
the
commencement of that Act;
(b)
which, in the case of a fund to which the Financial Institutions
Amendment Act, 1976, does not apply, arose before the commencement
of the Financial Institutions Amendment Act, 1977;
(c)
which a fund may reduce or settle under section 37D, to the extent
to which a fund may reduce or settle such debt; or
(d)
which is owed to a fund by a member in respect of arrear
contributions, but excluding amounts which are in arrear due to the
failure of the employer concerned to pay the member's contributions
to the fund after deduction thereof from the member's remuneration.’
[5]
The Shorter Oxford English
Dictionary
3 ed 1973.
[6]
Section 26(1) of POCA.
[7]
Compare
Rennie
NO v South African Sea Products Ltd
1986
(2) SA 138 (C) 143 A-G.
[8]
Van Heerden & another v
National Director of Public Prosecutions & another
(16910/11)
[2015] ZAWCHC 96
(22 June 2015).
[9]
Ibid para 37.
[10]
Ibid.
[11]
Section 14(1)
(a)
of POCA.
[12]
Compare
Lendalease
Finance (Pty) Ltd v Corporacion De Mercadeo Agricola & others
1976 (4) SA 464
(A) 489
where it was held that an applicant seeking to attach property must
satisfy the court that the property belongs to the
respondent.
[13]
At para 19.
[14]
At para 40.
[15]
Van Aarsten v Van Aarsten
2006
(4) SA 131
(T) paras 21-23.
[16]
Foit v First Rand Bank BPK
2002
(5) SA 148
(T) at 152G-H and 154E-155H.
[17]
In
Van
Heerden & another v National Director of Public Prosecutions &
another
(fn 7 above)
paras 38–42 the issue was discussed but not decided.
[18]
Compare
Minister
of the Interior v Cowley NO
1955
(1) (NPD) at 307 at G-H.
[19]
Elesang v PPC Lime Ltd &
others
2007 (6) SA 328
(NCK) paras 41-42.
[20]
Van Heerden & another v
National Director of Public Prosecutions & another
(fn
7 above) at para 42.