Associated Institutions Pension Fund and Others v Van Zyl and Others

• Jurisdiction: South Africa
• Judge: Harms JA, Mthiyane JA, Brand JA, Cloete JA and Comrie AJA
• Judgment Date: 26 August 2004
• Citation: 2005 (2) SA 302 (SCA)
• Docket Number: 268/03
• Hearing Date: 17 May 2004
• Counsel: M D Kuper SC (with him M Chaskalson) for the appellant. C E Puckrin SC (with him A N Oelofse) for the respondents.
• Court: Supreme Court of Appeal

Brand JA: H

[1] The first appellant (the AIPF) was established in terms of s 2 of the Associated Institutions Pension Fund Act 41 of 1963 (the Act) to provide pension funds for associated institutions. The latter were mainly universities, technikons and other institutions of a similar kind. The second and third appellants are the Minister and the Director-General of Finance. Their involvement is said to have arisen from the fact that the AIPF was administered by the National Department I of Finance. The appeal has its origin in the large scale withdrawal by employees of associated institutions of their pension interest from the AIPF to the newly established own pension funds of the individual institutions during 1994 and 1995. J

Brand JA

[2] One of the associated institutions was the University of Pretoria. All the respondents were employed by that university, and A until 31 December 1994 they were members of the AIPF. On that date their individual pension interests were transferred to the Universiteit van Pretoria Voorsorgfonds (the Voorsorgfonds). These transfers took place pursuant to regulations (the transfer regulations) that were promulgated in terms of the Act in Government Notice 821 of 22 B April 1994. According to the transfer regulations, the transfer value of each member's pension interest as at the transfer date was to be determined by the actuary of the AIPF. He is the fourth appellant in this matter, Mr Leon de Wit ('De Wit'). Broadly stated, the respondents' case is that the determination by De Wit was not properly made, with a resultant shortfall in the amounts that were C transferred to the Voorsorgfonds.

[3] The determination of the transfer values was finalised by August 1995. Nearly four years later, at the end of June 1999, the respondents launched an application in the Pretoria High Court for De Wit's determination to be reviewed and set aside. They also sought an order that the transfer values of their pension interest be D recalculated and that the recalculated amounts, together with interest, be paid over to the Voorsorgfonds by the AIPF, alternatively by the Minister. The Court a quo (Botha J) held, upon the strength of its interpretation of the transfer regulations, that De Wit's determination was not in accordance with these regulations. E Consequently the orders sought were granted. The appeal against that judgment is with the leave of the Court a quo.

[4] On appeal it was contended by the appellants that the Court a quo misconstrued the transfer regulations. They also contended that, in all the circumstances of the case, the Court a quo erred in not dismissing the review application on the ground F of respondents' unreasonable delay in bringing the application. The issues arising from these contentions can best be understood against the factual background that follows.

Factual background G

[5] The AIPF was governed by the provisions of the Act and the regulations ('the general regulations') that were promulgated by GN 1653 of 10 September 1976. Pursuant to the general regulations, the AIPF was subject to a statutory triennial actuarial valuation. These valuations were done on the basis of audited figures. During the 1980s and the 1990s the triennial actuarial valuations revealed a H substantial funding deficit. This gave rise to concern on the part of AIPF members and the associated institutions that were ultimately responsible for funding their pension benefits. As a result, by 1993 many of the associated institutions had for several years been exerting pressure on the Government to allow members to transfer their pension benefits out of the AIPF into privately administered pension funds to I be established by each of the institutions for that purpose. This pressure increased with the anxiety of the institutions to have the AIPF removed from government control before any political changeover after the democratic elections in April 1994. J

Brand JA

[6] The transfer regulations as eventually promulgated were preceded by several drafts which were prepared under the direction of a A workgroup consisting of representatives of the government and the associated institutions. The workgroup included De Wit as well as two professors of actuarial science, Prof Anthony Asher of the University of the Witwatersrand and Prof George Marx of the University of Pretoria. Subsequent to the promulgation of the transfer regulations, the Minister appointed an advisory board of experts to oversee the B transfer process. Different members of the board were appointed to protect the interests of the government, the associated institutions and the membership of the AIPF. Professors Asher and Marx were also members of the advisory board. C

[7] In terms of the transfer regulations, new pension funds, called 'own established funds', could be established by associated institutions for the benefit of their employees and members could elect between keeping their pension benefits in the AIPF or to transfer them to own established funds. D

[8] According to the transfer regulations, the transfer dates were to be agreed upon by the Director-General and each associated institution concerned, provided that such date could not be later than 31 March 1995. At the time there were 211 associated institutions. Many of them established their own funds. Various transfer dates were agreed upon over the 13-month period between April 1994 and March 1995. E The transfer date for the University of Pretoria was 31 December 1994. Eventually, over 80% of the original 50 000 members of the AIPF decided to join the autonomous funds established by their own institutions. Included in their number were the 1 700 respondents. F

[9] In terms of reg 2(4)(b) of the transfer regulations the AIPF had to make available to a member who elected to terminate his membership, an amount

'equal to the funding percentage multiplied by the actuarial obligation of the [AIPF] in respect of that member as determined by the actuary on the date on which his membership of the fund is G terminated, with interest thereon calculated at the bank rate from that date to the date on which the amount is paid. . .'.

The member was then obliged to pay the amount thus made available into the own established fund of his or her institution.

[10] The 'actuary' referred to in reg 2(4)(b) was De Wit. There is no dispute with regard to his determination of the H actuarial obligations of the AIPF in respect of each of the individual respondents on 31 December 1994. It is the other factor in the calculation provided for in reg 2(4)(b), ie the 'funding percentage' of the AIPF, which forms the subject of the dispute between the parties. 'Funding percentage' is defined in the transfer regulations. This definition, which is pivotal to the appeal, reads as follows: I

'''(F)unding percentage'', means the market value of the net assets of the [AIPF] on a fixed date [ie 31 December 1994], expressed as a percentage of the calculated aggregate actuarial obligation of the [AIPF] on that date, as determined by the actuary.' J

Brand JA

'Actuarial obligation' is in turn defined as signifying, 'with regard to a particular member . . . of [the AIPF], . . . the actuarial obligation of [the AIPF] with regard to that member . . . on a fixed date, calculated by the actuary'. The term 'actuary' is defined independently as a reference to the actuary of the AIPF, appointed in terms of the general regulations.

[11] De Wit determined the funding percentage of the AIPF for B 31 December 1994 at 60%. This determination was communicated to the University of Pretoria on 6 February 1995 and on 23 August 1995 the individual transfer amounts pertaining to those who elected to move to the Voorsorgfonds were calculated by him on that basis. These totalled some R286,5m which was paid over to the Voorsorgfonds. C

[12] In January 1996 the triennial statutory valuation of the AIPF as at 30 September 1994, was completed by De Wit and became generally available. According to this valuation the funding percentage as at the latter date was fixed at 66%. Subsequently De Wit performed a further valuation of the rump of the AIPF as at 31 March 1995 when those members who had elected to leave the AIPF were D finally identified. This valuation yielded a funding percentage of 84,3% as at that date. These significant variations in the funding percentage over a relatively short period of time led to discontent among those members whose parting benefits were calculated on substantially lower funding percentages. E

[13] First to act were some 2 500 employees and pensioners of the University of South Africa ('Unisa'). Their transfer date was 30 November 1994 and the funding percentage of the AIPF determined by De Wit as at that date was 60,8%. In October 1998 they instituted review proceedings similar to these in the Pretoria High Court against the AIPF ('the Unisa case'). F The initial outcome of those proceedings favoured the Unisa employees. In a judgment handed down by Southwood J in February 2000, De Wit's determination of the funding percentage as at 30 November 1994 was set aside and the attendant relief sought was granted. On appeal to this Court that decision was, however, overturned. The judgment of this Court, which was handed down on 31 May 2001, has subsequently been G reported as Associated Institutions Pension Fund and Another v Le Roux and Others 2001 (4) SA 262 (SCA).

[14] The applicants in the Unisa case contended that the root of De Wit's inaccurate determination of the funding percentage at their transfer date was to be found in his adoption of a 'data loading factor' of 7,5% to the actuarial obligations H which appeared from the records of the AIPF in establishing the aggregate actuarial obligations of the...