Deduction for Dishonest Conduct – Power of Withholding

1. Deduction for Dishonest Conduct – Power of Withholding NaleenJeram

2. Who must make the decision?  Fund and not Employer! • When deciding - consider rights and interests of both parties • Nkuna (PFA)  and Moeng (PFA) – payment of benefit – method leads to abuse • Nonxuba (PFA) and Sigasa (PFA) – refusal to complete withdrawal notification – abuse of power 2

3. The damage caused to the Employer must be by reason of theft, dishonesty, fraud or misconduct by the Member • What does “misconduct” in this context mean? • Gradwell (HC) – providing information to competitor – papers did not specifically allege dishonest conduct – is it necessary? • Boshoff (HC) – signed suretyship obligations for cc of Member 3

4. No express withholding provision • Highveld Steel (SCA) – leading case • Court a quo – adopts restrictive interpretation of section 37D(1)(b) • SCA – rejects lower court reasoning and approves reasoning adopted in Charlton (HC), Twigg, Appanna, Buthelezi and Allison (all PFA) • Adopts purposive approach 4

5. Factors to consider when deciding issue • Time period within which the Fund must be notified of request to withhold 5

6. Time period within which proceedings must be launched • De Kok (PFA) – 2 month period • Coopman (PFA) – death benefit – civil claim against estate of the deceased • Mahomed (PFA) – no delay on part of Employer in criminal proceedings • Cases reveal that must lodge soon after termination unless exceptional circumstances 6

7. Evidence to be placed before Fund • If clear that one of the material requirements will not be met – then cannot withhold • CCMA or LC ruling insufficient – see Ramokgadi (PFA) and Erasmus (PFA) 7

8. Civil vs Criminal Route • Control of process • Compensation orders – not easily obtained • See Ndumiso, Laing, Sayed-Essop, Le Roux, Buthelezi (all PFA) – no compensation orders • Msimango (HC) – obiter remarks on criminal route – not correct 8

9. Prima facie case consideration • Reasonable prospects of success requirement • Practically not possible and desirable 9

10. What can be withheld? • Loss suffered by Employer (Compensation) • Abuse of process – see Dikiza(PFA) • Legal costs - see Coka (PFA) 10

11. Portfolio in which benefit held • Benefit to be protected from market related declines • Dakin (PFA) – fund ordered to regulate the portfolio • Sanlam Retirement Fund (HC) – on accrual – benefit must be disinvested from market portfolios 11

12. Must Monitor Proceedings • No unreasonable delay on the part of the Employer • Govender (PFA) – Employer solely responsible for delays • Sayed –Essop(PFA) – Member responsible for delays in criminal trial 12

13. Ranking of competing claims • Smith (PFA)  - Maintenance & Divorce orders outrank Employer’s claim • Section 37D(3)(b) – hierarchy of orders 13

14. THANK YOU 14