Fundsatwork Umbrella Pension Fund v Guarnieri and Others

• Jurisdiction: South Africa
• Judge: Cachalia JA, Wallis JA, Mbha JA, Mocumie JA and Eksteen AJA
• Judgment Date: 31 May 2019
• Citation: 2019 (5) SA 68 (SCA)
• Docket Number: 830/2018 [2019] ZASCA 78
• Hearing Date: 31 May 2019
• Counsel: S Khumalo for the appellant. TP Krüger SC (with C D'Alton) for the respondents.
• Court: Supreme Court of Appeal

Wallis JA (Cachalia JA, Mbha JA, Mocumie JA and Eksteen AJA concurring):

[1] On 22 February 2014 Mr Massimiliano Guarnieri and his girlfriend were killed in a motor vehicle accident. At that time he was still married G in community of property to the first respondent, Mrs Anna Marie Guarnieri (Mrs Guarnieri), although they had been living apart for somewhere between 18 months and two years and she had commenced divorce proceedings against him. Mr and Mrs Guarnieri had two children, the second and third respondents, respectively a son and a H daughter, who were at the time of his death 24 and 21 years old, respectively. Both lived with their mother. The son was employed, earning a salary of R5500 per month, and claimed to be self-supporting, while the daughter was studying.

[2] Mr Guarnieri was also survived by his mother, Mrs Anna-Maria Guarnieri I (Mrs Guarnieri Snr), who was then 71 years old and a pensioner, resident in an old-age home in Durbanville, Western Cape, and suffering from emphysema. In May 2014, shortly after her son's death, she moved into the frail-care section of the home where she resided. Mr Guarnieri also had a sister, Ms Barbara Swart, who resided in Australia. J

Wallis JA (Cachalia JA, Mbha JA, Mocumie JA and Eksteen AJA concurring)

[3] A At the time of his death Mr Guarnieri was a member of the appellant, the Fundsatwork Umbrella Pension Fund (the Fund). The gross death benefit due to him by virtue of his membership was R1 468 501,75. After the deduction of tax the amount available for distribution was R1 164 657,19. On 25 July 2014 the board of the Fund resolved in terms B of s 37C(1)(a) the Pension Funds Act 24 of 1956 (the PFA) to allocate 42% of the death benefit to Mr Guarnieri's mother; 37 percent to his widow; 8% to his son and 13 percent to his daughter. Mrs Guarnieri Snr had died four days before that decision was made. However, pursuant to a power of attorney in favour of Ms Swart and an election form completed before her death, the amount of the award to her, less an C advance payment on 23 May 2014 in an amount of R75 555,25, was paid to Old Mutual on 1 August 2014 [1] and used to purchase an annuity in her favour. The beneficiary of that annuity after her death was her daughter Ms Swart.

[4] D Mrs Guarnieri challenged that distribution in an attempt to secure an allocation in favour of herself and her children of that portion of the death benefit awarded to her late mother-in-law. The initial distribution was set aside by the Sixth Respondent, the Pension Funds Adjudicator (the Adjudicator), and referred back to the board of the Fund to take the decision afresh in the light of the terms of the Adjudicator's determination. E The Board then made exactly the same decision as previously in regard to the distribution of the death benefit. Mrs Guarnieri and her children challenged this by way of an application to the Gauteng Division of the High Court (Pretoria). [2] The second determination was set aside by Prinsloo J and replaced with an order that an amount of a F little over half a million rand, being the amount allocated to Mrs Guarnieri Snr, less an initial payment made to her during her lifetime, be distributed to Mrs Guarnieri and her children in proportions to be determined by the board. The appeal against that order is with his leave.

[5] The issue in this appeal arises from the fact that s 37C of the PFA G removes the allocation of pension benefits on the death of a pension-fund member from the unfettered choice of the member, whether by will or by nomination. It reflects a legislative decision that funds becoming available in that way should be available to be used for the benefit of the deceased's dependants so that they are less likely to be a drain on the H state's resources. This serves the social purpose of providing some protection for dependants, without entirely overriding the wishes of a deceased who has nominated beneficiaries or made a will. [3]

Wallis JA (Cachalia JA, Mbha JA, Mocumie JA and Eksteen AJA concurring)

[6] There is no indication that Mr Guarnieri made a will or nominated A any beneficiaries. Accordingly the decision as to the distribution of the death benefit vested in the board of the pension fund under s 37C(1)(a) of the PFA. [4] The relevant provision reads:

'(1) Notwithstanding anything to the contrary contained in any law or in the rules of a registered fund, any benefit (other than a benefit B payable as a pension to the spouse or child of the member in terms of the rules of a registered fund, which must be dealt with in terms of such rules) payable by such a fund upon the death of a member, shall . . . not form part of the assets in the estate of such a member, but shall be dealt with in the following manner:

(a)

If the fund within twelve months of the death of the member C becomes aware of or traces a dependant or dependants of the member, the benefit shall be paid to such dependant or, as may be deemed equitable by the fund, to one of such dependants or in proportions to some of or all such dependants.'

[7] The distribution of death benefits must, where there are dependants of a deceased member, be dealt with under this section. [5] The term D 'dependant' is defined in s 1 of the PFA as follows:

''Dependant'', in relation to a member, means —

(a)

a person in respect of whom the member is legally liable for maintenance;

(b)

a person in respect of whom the member is not legally liable for E maintenance, if such person —

(i)

was in the opinion of the board, upon the death of the member in fact dependent on the member for maintenance;

(ii)

is the spouse of the member;

(iii)

is a child of the member, including a posthumous child . . . ;

(c)

a person in respect of whom the member would have become F legally liable for maintenance, had the member not died.'

[8] The effect of s 37C(1)(a), as read with the definition of 'dependant', is to require a fund, within a period of 12 months from the death of the member, to identify the dependants of the deceased who may potentially qualify for an equitable distribution from the deceased's death benefit in G terms of s 37C. [6] Having once identified the potential class of dependants, the board of the fund is vested with a large discretion to determine, in the light of its assessment of their respective needs, in what proportions the death benefit will be distributed among the class of dependants. H

Wallis JA (Cachalia JA, Mbha JA, Mocumie JA and Eksteen AJA concurring)

[9] A The primary issue in this case is whether Mrs Guarnieri Snr was a dependant for the purposes of the distribution of her son's death benefit. If she was not, then the distribution to her was contrary to the provisions of s 37C(1)(a) and the High Court correctly set it aside. Answering the question requires us to determine at what stage a person must be a B dependant in order to be entitled to participate in a distribution under the section. Is it the date of the member's death, or the date upon which the decision in regard to the distribution is made, or the date of the distribution itself? The issue arises because, in the ordinary course of human affairs, and given that the board of the fund has 12 months to investigate the existence of dependants, the situation may arise where C someone who was qualified to be recognised as a dependant at one stage ceases to be qualified at a later stage. The Fund's contention was that the determination had to be made at the date of death of the member and that...