Pepcor Retirement Fund and Another v Financial Services Board and Another

• Jurisdiction: South Africa
• Judge: Vivier ADP, Marais JA, Navsa JA, Cloete JA and Lewis JA
• Judgment Date: 30 May 2003
• Citation: 2003 (6) SA 38 (SCA)
• Docket Number: 198/2002
• Hearing Date: 09 May 2003
• Counsel: C D A Loxton SC (with him A E Franklin SC and J Wilson) for the appellants. A M Breitenbach for the respondents.
• Court: Supreme Court of Appeal

Cloete JA:

Introduction E

[1] This appeal concerns primarily the locus standi of a functionary, empowered by legislation to make a decision in the public interest, to have that decision reviewed in a court of law and set aside; and the question whether a material mistake of fact should be a ground of review of such a decision. F

Facts

[2] At issue are certificates granted by the second respondent, the Registrar of Pension Funds (the Registrar), issued in terms of s 14(1) of the Pension Funds Act 24 of 1956 (the Act) in respect of the Pepkor Pension Fund (the fund); and also the transfer of R9 223 118 (the R9,2 m) made from the fund to the Pepkor Retirement Fund, the G first appellant, which was not authorised in terms of that section. Commendably the complex chain of events was comprehensively and compendiously analysed by the Court below (Rogers AJ) in a judgment which has been reported sub nom Financial Services Board and Another v De Wet NO and Others 2002 (3) SA 525 (C). Neither side H challenged this analysis and accordingly the following relatively brief summary will suffice for the purposes of this appeal.

[3] The fund was a defined benefit fund registered in 1973 for the purpose of providing retirement and ancilliary benefits to eligible I employees in what was to become the Pepkor Group. At all times material to this matter that Group consisted of the holding company, Pepkor Ltd and three other operating companies: Ackermans, Pep Stores and Shoprite. The fund is in liquidation; the liquidator, the first defendant in the Court below, did not oppose the action and was not J

Cloete JA

represented in the appeal. The second appellant was the controlling A employer ('beherende werkgewer') for the purposes of administration of the fund.

[4] During the mid 1990s the fund was 'unbundled' - initially into three 'daughter' funds, the Shoprite Pension Fund (the second defendant), the Ackermans Pension Fund (the third defendant) and the Pep Stores Pension Fund B (the fourth defendant), which were also defined benefit funds; and ultimately, also into four defined contribution pension funds, the Shoprite Checkers Retirement Fund (the fifth defendant), the Ackermans Retirement Fund (the sixth defendant), the Pepkor Retirement Fund (the seventh defendant and the first appellant) and the Pep Retirement Fund (the eighth defendant). The fund continued C to exist. The 'unbundling' was effected by a series of applications for transfers of business in terms of s 14(1) of the Act, all of which, bar one, were approved by the Registrar. The exception was the amount of R9,2 m which was paid to the first appellant. D

[5] Before the approvals were furnished the Registrar was at his request furnished with information by one Meyer who was the actuary to the fund (or, to use the terminology in the Act, its 'valuator'). The information related to the funding level of the fund. The funding level is the ratio of the actuarial value of assets to the actuarial value of liabilities. Meyer said that the funding level of the fund before and E after the transfers from the fund to the 'daughter' funds was 137% 'met uitsluiting van spesiale reserwes' in the former case and excluding certain 'spesiale surplusse soos deur die makelaar versoek' in the latter. It is common cause that in fact the funding level of the fund before the transfers was 151% and F thereafter, 606%. The Court a quo criticised Meyer's method of calculating the funding levels, which essentially involved the unwarranted exclusion of amounts in the fund, as 'arbitrary and indefensible' (para [244]).

[6] No attempt was made on appeal to justify Meyer's calculations. The applications for the transfers were approved in G ignorance of Meyer's misstatements and the transferring members transferred from the fund to the 'daughter' funds without knowledge of the substantial surplus which stood to the credit of the fund. In contrast to the funding level of the fund after the transfers which, as I have said, was 606%, the funding levels of the three H daughter funds, the second to fourth defendants, was respectively 123%, 121% and 116%. The 'unbundling' left the fund with a very large surplus (which by now must be over R100 m), no active members and only 14 pensioners. I

[7] The trustees of the fund in the fullness of time applied to the Registrar for the liquidation of the fund, and this was approved. The trustees thereafter submitted a draft amendment to the rules of the fund which would permit the payment of the surplus to the second appellant. It was consideration of this draft amendment which led the chief actuary J

Cloete JA

of the Financial Services Board ('FSB') to discover the initial misstatements by Meyer and the unauthorised transfer of the A R9,2 m to the first appellant.

[8] The FSB, a statutory body established by the Financial Services Board Act 97 of 1990, as the first plaintiff and the Registrar, as the second plaintiff, brought the proceedings in the Court below, the purpose of which was to review and set aside the B approvals and the transfers made pursuant thereto, and to direct the first appellant to repay the R9,2 m together with interest to the liquidator of the fund. Rogers AJ granted that relief but suspended the declarations of invalidity for a period of six months, with the proviso that any party to the action might, on notice to the other parties, apply on good cause shown for the period of suspension to be lifted, C reduced or extended. The appellants appeal to this Court with the leave of the Court below.

[9] In this Court, as in the Court below, the appellants challenged the locus standi of the FSB and the Registrar to bring the proceedings. It would be convenient to deal with these D questions first, after quoting the provisions of s 14(1) of the Act as it read at the relevant time:

'14(1) No transaction involving the amalgamation of any business carried on by a registered fund with any business carried on by any other person (irrespective of whether that other person is or is not a registered fund), or the transfer of any business from a registered fund to any other person, or the transfer of any business from any E other person to a registered fund shall be of any force or effect unless -

(a)

the scheme for the proposed transaction, including a copy of every actuarial or other statement taken into account for the purposes of the scheme, has been submitted to the Registrar; F

(b)

the Registrar has been furnished with such additional particulars or such a special report by a valuator, as he may deem necessary for the purposes of this subsection;

(c)

the Registrar is satisfied that the scheme referred to in para (a) is reasonable and equitable and accords full recognition -

(i)

to the rights and reasonable benefit expectations of the persons concerned in terms of the rules of a fund concerned; and G

(ii)

to any additional benefits the payment of which has become established practice,

and that the proposed transactions would not render any fund which is a party thereto and which will continue to exist if the proposed transaction is completed, unable to meet the requirements of this Act or to remain in a sound financial condition or, in the case of a fund H which is not in a sound financial condition, to attain such a condition within a period of time deemed by the Registrar to be satisfactory;

(d)

the Registrar has been furnished with such evidence as he may require that the provisions of the said scheme and the provisions, insofar as they are applicable, of the rules of every registered fund which is a party to the transaction, have been carried out or that adequate arrangements have been made to carry out such I provisions at such times as may be required by the said scheme;

(e)

the Registrar has forwarded a certificate to the principal officer of every such fund to the effect that all the requirements of this subsection have been satisfied.' J

Cloete JA

Locus standi of the Registrar A

[10] This Court has already held that if an administrative act has been performed irregularly - be it as a result of an administrative error, fraud or other circumstance - then, depending upon the legislation involved and the nature and functions of the public body, it may not only be entitled but also bound to raise the matter in a court of law, if prejudiced: Transair (Pty) Ltd v B National Transport Commission and Another 1977 (3) SA 784 (A) at 792H - 793G.

[11] The Act was passed, as appears from the preamble thereto, to provide, inter alia, for the regulation of pension funds. It is the Registrar who performs this function. As the learned Judge in the Court below pointed out (paras [169] - [175]) virtually every C section of the Act contains some or other provision reflecting the Registrar's supervision over the affairs of pension funds. It is not necessary to repeat the analysis.

[12] It was submitted on behalf of the appellants that, in contradistinction to certain other sections of the Act, s 14(1) does D not specifically give the Registrar the right to apply to Court to have a certificate wrongly granted by him set aside; and that the Registrar accordingly does not have that power. It was further submitted that the appeal procedure for which provision is made in s 26(2) of the Financial Services Board Act, points to the same conclusion. E

[13] The arguments are without merit. Section 14 deals with an important aspect of the regulation of pension fund organisations. It governs the amalgamation of any business carried on by a registered fund with any business carried on by any other person; and the transfer of any business from a registered fund to any person, or from any person to a registered fund. The section...