Roestorf and Another v Johannesburg Municipal Pension Fund and Others

• Jurisdiction: South Africa
• Judge: Navsa JA, Nugent JA, Heher JA, Cachalia JA and Tshiqi JA
• Judgment Date: 23 March 2012
• Citation: 2012 (6) SA 184 (SCA)
• Docket Number: 235/2011 [2012] ZASCA 24
• Hearing Date: 20 February 2012
• Counsel: V Ngalwana (with S Gcelu) for the appellants. JMA Cane SC (with KS McLean) for the first respondent. No appearance for the second and fourth respondents. AE Franklin SC (with TN Ngcukaitobi) for the third respondent.
• Court: Supreme Court of Appeal

Heher JA: E

[1] The two appellants were until 1995 employees of the City of Johannesburg (the third respondent). It was a condition of their employment that they become and remain members of the first respondent, the F Johannesburg Municipal Pension Fund (the Fund).

[2] Both appellants applied to retire from service on the grounds of ill-health and were duly medically boarded, first appellant with effect from 1 December 1995 and second appellant from 1 September 1995. At the time the first appellant was four days short of 34 years of age and G had been employed by the city since 1 January 1988, while the second appellant was 31 years and five months old and had begun his employment on 1 April 1988.

[3] The appellants qualified for retiring benefits in terms of the rules of the Fund. Both were regarded as totally incapacitated by their respective physical and mental conditions and their pension entitlements were H calculated with regard to that incapacity.

[4] The appellants received the pensions as calculated without demur until 2003. On 4 September of that year the first appellant was deemed totally incapacitated in proceedings brought by him against the City I under the Compensation for Occupational Injuries and Diseases Act 130 of 1993. During the course of a conversation between the appellants and the consultant employed by them in those proceedings, their pension entitlements were discussed and, after reference to rules 21(1)(b) and 16 of the Fund, the appellants were advised by the consultant that they were entitled to full benefits as if they had remained J in the employment of the City to the age of 63 years. This, according to

Heher JA

the appellants' replying affidavit, 'triggered us to believe that our entitled A retirement benefits were incorrectly calculated'.

[5] The appellants arranged a meeting on 21 October 2003 with the Fund's actuary, Mr Hunter, who advised them that they were wrong in their interpretation of the rules but undertook to submit their grievances B to the board of trustees. When the board refuted their claims they reluctantly accepted the decision. As the second appellant deposed: 'It must be taken into consideration that the computations of our retiring benefits are highly technical issues.'

[6] As a result of a communication received by the appellants from the C Fund in December 2005 relating to proposed changes to the Fund, their dormant suspicions as to the correctness of the computation of their benefits were re-aroused. Their endeavours to address their perceived wrongs through meetings and correspondence with the City and the Fund proved fruitless. They took legal advice. As a result, on 8 February 2006, they filed a complaint with the pension funds adjudicator (the fourth respondent) in terms of s 30A(3) of the Pension Funds Act 24 of 1956 (the Act). D

[7] The complaint was directed to three principal issues of which one was upheld by the adjudicator, viz that the complainants' retiring benefits had been incorrectly calculated in contravention of the rules of E the Fund. The adjudicator ordered the Fund 'to compute the complainants' disability pension at the rate of 2,0108 in terms of rule 16(b)' within seven days of the date of the determination, and to pay the revised pension and arrears together with interest within a further seven days.

[8] The Fund, dissatisfied with the determination, applied to the F South Gauteng High Court as contemplated in s 30P of the Act for an order reviewing and setting aside the determination and confirming the Fund's computation of the appellants' pensions at the rate of 1,7516 in terms of rule 16(b).

[9] The appellants opposed the application while the adjudicator abided G the decision of the court. The appellants applied in reconvention by notice of motion dated 2 February 2010 for six declaratory orders as follows:

'1.1

That in terms of rule 15 of the rules of the applicant [the Fund], the second respondent [Roestorf] is entitled to 10 years' bonus service. H

1.2

That in terms of rule 15 of the rules of the applicant, the third respondent [Jansen van Vuuren] is entitled to seven years' bonus service.

1.3

That in calculating the retiring benefits in terms of rule 16 of the rules of the applicant, the second and third respondents are I entitled to the benefits to be calculated up and to their normal retirement age of 63, which is on 5 December 2024, and 19 May 2027 respectively.

1.4

That the second and third respondents are entitled to have included in the computation for their retirement benefit, all the increases and all declared allowances as stated in the Johannesburg Conditions of Service. J

Heher JA

1.5

A That the second and third respondents are entitled to a thirteenth cheque, equal to one month's salary yearly, and that they are entitled to have such thirteenth payment included in the computation of their retiring benefits.

1.6

That the second and third respondents are entitled to interest a tempore morae on all arrear moneys owed, as from date of termination B to date of payment.'

The appellants sought an award of costs against the Fund and such other respondents as opposed the relief that they claimed. In the event opposition came from the Fund and the City.

C [10] Maluleke J made an order in the following terms:

'1.

The application to set aside the determination of the adjudicator is upheld and granted with costs.

2.

The adjudicator's determination dated 25 September 2009 directing the applicant to compute the pension of the second and third respondents at the rate of 2,0108% is set aside.

3.

D The second and third respondents' claims in reconvention are dismissed with costs including the costs of two counsel for the applicant and the costs of the fifth respondent [the City].

4.

The costs in para 1 to include the costs of two counsel for the applicant and the costs of the fifth respondent.'

E [11] In brief, the learned judge held that:

1.

The appeal against the determination of the adjudicator should be upheld because the complaint to her was time-barred in terms of s 30I of the Act and had prescribed in terms of s 12 of the Prescription Act 71 of 1969.

2.

The adjudicator had erred in equating the 'exact age of retirement' F in s 16 of the rules with the pensionable age of 63 years in determining the percentage rate of calculation.

3.

The claims in reconvention had not formed part of the appellants' complaint to the adjudicator and because the ambit of the court's jurisdiction is delimited by the terms of the complaint, the court possessed no jurisdiction to entertain those claims.

4.

G In any event, the claims in reconvention were time-barred in terms of s 30I of the Act and had also prescribed.

[12] The learned judge refused the appellants leave to appeal to this court but leave was granted on application under s 21(2) of the Supreme Court Act 59 of 1959.

H [13] On appeal before us appellants' counsel limited their appeal to the following issues:

1.

The correctness of the findings of the court a quo in relation to the time-barring and prescription of the complaint and claims in I reconvention.

2.

Whether the claims in reconvention constituted impermissible new matter before the court a quo.

3.

Whether the appropriate factor in the calculation of the pension entitlements was 1,7516% or 2,0108%.

4.

Whether 'bonus service' should also have been included in the J calculation of 'pensionable service' in respect of both appellants

Heher JA

and, if so, the effect that such inclusion would have on the A calculation.

5.

The application to and effect of 'final average emoluments' in rule 16 on the calculation of the appellants' pensions.

[14] The issues summarised in item 1 of the previous paragraph may conveniently be dealt with together. B

Prescription

[15] Counsel for the Fund and the City supported the conclusion of the court a quo that such claim to a correction of the appellants' pension fund entitlement as may have arisen from an incorrect computation by C the Fund had been extinguished by prescription. They contended that prescription commenced to run shortly after the appellants were provided with details of their entitlement towards the end of 1995 and by reason of s 12(1) read with s 12(3) of the Prescription Act 68 of 1969 the period of three years was completed sometime before the year 2000.

[16] So technical an avoidance of correcting a manifest injustice may be D regarded as morally questionable. It is also unsound according to principles of law.

[17] It is no doubt possible and — perhaps — correct to regard each incorrect monthly payment as a breach of contract by the Fund which E gives rise to an independent cause of action and results in a series of debts arising from month to month. See in this regard Barnett and Others v Minister of Land Affairs and Others 2007 (6) SA 313 (SCA) (2007 (11) BCLR 1214) paras 20 – 21 and the cases there cited. In such an event each cause would prescribe three years from the date that it arose. I prefer, however, to approach the case from a different perspective. F

[18] On retirement the appellants qualified for and were the recipients of pensions justified by their total incapacity to perform their duties in the service of the City. Their pension entitlement was an annualised sum (annuity) paid monthly to each of them. The Fund commenced such payments in 1995 and has done so ever since. The only rationale for such G payments was the rules of the Fund to which the appellants had been contributing members. However, each payment constituted a tacit acknowledgement of the Fund's obligation to pay according to its rules. For the purposes of the Prescription Act that obligation was the 'debt' owed to and claimable by the...