Mudau v Municipal Employees Pension Fund and others
| Jurisdiction | http://justis.com/jurisdiction/166,South Africa |
| Judge | Maya DCJ, Kollapen J, Madlanga J, Majiedt J, Makgoka AJ, Mathopo J, Potterill AJ, Rogers J and Theron J |
| Judgment Date | 02 August 2023 |
| Citation | 2023 JDR 2871 (CC) |
| Hearing Date | 07 March 2023 |
| Docket Number | CCT 142/22 |
| Court | Constitutional Court |
Kollapen J (Maya DCJ, Madlanga J, Majiedt J, Makgoka AJ, Mathopo J, Potterill AJ, Rogers J and Theron J concurring):
Introduction
This matter traverses the nature of the relationship between a pension fund and its members and the manner in which benefits arising out of the fund are quantified and paid in terms of the Pension Funds Act [1] (Act). More crisply, two issues arise which may require determination. First, whether a pension fund may process a member’s claim for a withdrawal benefit in terms of a rule amendment that has yet to be registered by the Registrar of Pension Funds (Registrar). Second, whether a rule amendment may retrospectively or retroactively impact accrued or vested pension fund benefits. [2]
We live in an increasingly uncertain world, but the human condition yearns for certainty in the hope that it will ameliorate our fears and insecurities and enable us to enter the future with less trepidation and a greater sense of confidence. In an unequal society such as ours, even that limited level of security is beyond the reach of many as they simply battle against all odds to eke out a living, let alone plan and contemplate the future.
For others, however, the ability to plan for their future, including their financial well-being, is within their means and a pension is one of the more effective vehicles for future financial planning. A pension is a crucial instrument through which individuals plan and anticipate a period in which they will no longer be working to generate income. Pensions also contribute towards fulfilling the right to social security as they are a
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Kollapen J (Maya DCJ, Madlanga J, Majiedt J, Makgoka AJ, Mathopo J, Potterill AJ, Rogers J and Theron J concurring)
means by which individuals can secure financial stability through monetary contributions. [3] South Africa has about 5 000 registered retirement funds, with approximately 17 702 000 total members and aggregate total assets of R4.34 billion. [4] Pension funds are important not only for individuals wishing to make decisions regarding their work and retirement but for the economy as a whole.
Pensions provide an opportunity for individuals to live fully and meaningfully upon retirement. This is especially important in the context of South Africa’s racially divided past, its developing economy, and the broad reliance on government social assistance.
Factual background
The dispute in this matter arises from a withdrawal benefit claim from the Municipal Employees’ Pension Fund (Fund) – a pension fund registered in terms of section 4 of the Act, made by the applicant, Mr Pandelani Midas Mudau (Mr Mudau). Mr Mudau was employed by the third respondent, Vhembe District Municipality, from 3 May 2003 until his resignation on 31 May 2013. He was a member of the Fund throughout his employment and, upon his resignation, became entitled to withdrawal benefits in terms of the Fund’s Rules (Rules). The Fund was established in 1970. Its purpose is to manage financial contributions and maximise the return on investment of its members, who are largely previously disadvantaged employees of local government authorities. The second respondent, Akani Retirement Fund Administrators (Pty) Limited (Akani), is the administrator of the Fund. I shall refer to the Fund and Akani collectively as “the respondents”.
Prior to 2013, rule 37 of the Rules stated that a member’s withdrawal benefit would be three times a member’s contribution with interest (old rule). However, in January 2013, the Fund received an actuarial valuation report which warned that it was
2023 JDR 2871 p5
Kollapen J (Maya DCJ, Madlanga J, Majiedt J, Makgoka AJ, Mathopo J, Potterill AJ, Rogers J and Theron J concurring)
at risk of failing to meet its future liabilities due to, amongst other things, the calculation of its withdrawal benefits. This placed its viability in jeopardy. Consequently, on 21 June 2013, a decision was made by the Fund’s board to amend rule 37 of the Rules in order to provide that a member’s withdrawal benefit would be one and a half times a member’s contributions with interest (unregistered amended rule). The unregistered amended rule further provided that the amendment would have retrospective effect from 1 April 2013. On 22 July 2013, the Fund made an application to the Registrar to register the unregistered amended rule.
On 16 October 2013, Mr Mudau, who had resigned with effect from 31 May 2013, was paid a withdrawal benefit of R646 437.42 in terms of the unregistered amended rule, which, at that stage, was pending registration by the Registrar. Mr Mudau alleged that he was entitled to receive a withdrawal benefit of R2 140 313.19 in terms of the old rule and referred a complaint to this effect to the Pension Funds Adjudicator (Adjudicator) on 2 December 2013. He sought a ruling that he was entitled to be paid the balance of R1 493 875.77.
On 1 April 2014, the Registrar registered the amended rule.
Litigation history
Pension Funds Adjudicator
The complaint was referred to the Adjudicator in terms of section 30A of the Act. [5] In a determination issued on 7 July 2014, the Adjudicator found in favour of
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Kollapen J (Maya DCJ, Madlanga J, Majiedt J, Makgoka AJ, Mathopo J, Potterill AJ, Rogers J and Theron J concurring)
Mr Mudau, holding that the unregistered amended rule could not be applied until it had been approved and registered by the Registrar. This was in line with a previous determination of a separate complaint brought before the Adjudicator by another member of the Fund as a result of the application of the unregistered amended rule to the calculation of benefits. [6] Additionally, the Adjudicator held that the retrospective amendment could not be applied to benefits that had already accrued before it was approved by the Registrar. The Adjudicator concluded that the old rule applied to Mr Mudau’s withdrawal benefit. The Fund was ordered to pay Mr Mudau the balance to which he was entitled under the old rule, together with interest.
High Court
Dissatisfied with the Adjudicator’s findings, the respondents brought an application in terms of section 30P of the Act [7] to review and set aside the Adjudicator’s determination. The application for review was advanced on the grounds that:
the Adjudicator lacked jurisdiction to determine that the effective date of the unregistered amended rule was inapplicable, and her decision was thus invalid and
the Adjudicator’s decision was based on material errors of fact and law. The High Court dismissed the application with costs, finding that there was no basis upon which the determination of the Adjudicator could be reviewed or set aside.
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Kollapen J (Maya DCJ, Madlanga J, Majiedt J, Makgoka AJ, Mathopo J, Potterill AJ, Rogers J and Theron J concurring)
Full Court
The respondents appealed to the Full Court with the leave of the High Court. They did so on the basis that the High Court had erred in finding that, amongst other things, the effective date of the rule amendment was the date of approval and registration by the Registrar (1 April 2014) rather than the effective date (1 April 2013) specified in the amended rule adopted by the Fund and registered by the Registrar.
The Full Court, by a majority, found that the Adjudicator was not obliged to apply the unregistered amended rule which had not been approved and registered by the Registrar when Mr Mudau resigned and was paid his resignation benefit. It further found that the amendment could not be approved retrospectively vis-à-vis Mr Mudau, as he was no longer a member of the Fund when the Fund resolved to amend the rule and at the time the amended rule was registered. The minority found for the Fund on the basis that the Adjudicator had essentially found that the Fund could not pass a retrospective rule amendment, and that this was ultra vires the powers of the Adjudicator. The minority also held that the Adjudicator could not invalidate the rule amendment that had been approved by the Registrar until it was reviewed and set aside. The appeal was dismissed with costs.
Supreme Court of Appeal
The Supreme Court of Appeal granted the respondents leave to appeal the Full Court’s judgment and order. Their argument in the main was that the Adjudicator had erred in finding that the unregistered amended rule could not, despite its express retroactivity, apply to withdrawal benefits which accrued before it was registered.
The Supreme Court of Appeal found that the Act, read together with the Rules, authorised the Fund to amend its Rules and to determine the effective date of application of the amended rule. It said that the clear and unambiguous language contained in the amended rule meant that, once registered, the amended rule could apply retroactively
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Kollapen J (Maya DCJ, Madlanga J, Majiedt J, Makgoka AJ, Mathopo J, Potterill AJ, Rogers J and Theron J concurring)
to all withdrawal benefits which had accrued to the Fund’s members as of 1 April 2013, the date stipulated in the amended rule approved by the Registrar. Accordingly, the appeal was upheld with costs.
Before this Court
Aggrieved by the decision, Mr Mudau approached this Court seeking condonation for his late filing of this application and for leave to appeal the whole judgment and order of the Supreme Court of Appeal. The Institute for Retirement Funds Africa NPC (IRFA), a non-profit company which represents and promotes the interests of the retirement industry in South Africa, was admitted as amicus curiae and granted leave to make written and oral submissions. I set out below cumulatively, under appropriate headings, the submissions made by the parties in their respective submissions to this Court’s directions [8] as well as...
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