Download
1 / 71
710 likes | 725 Views
Stay informed about recent pension fund case law, including administrative action, PAJA challenges, restructuring, clean break principle, and more.
E N D
Contents • Case law involving administrative action and PAJA, collateral challenges, and condonation for late submission of review applications and for collateral challenges • Some other legal issues included • SCA case on restructuring and transfer of surplus to employer reserve account • Applicability of Pension Funds Act … large bonus declaration prior to Surplus Apportionment Date • SCA case on Clean Break Principle • Appeal against Registrar’s intervention in liquidation • Some s37C matters
PAJA … Why is this an issue for funds? Constitution: Bill of Rights Section 33. Just administrative action 33.1 Everyone has the right to administrative action that is lawful, reasonable and procedurally fair. 33.2 Everyone whose rights have been adversely affected by administrative action has the right to be given written reasons 33.3 National legislation must be enacted to give effect to these rights, and must a. provide for the review of administrative action by a court or, where appropriate, an independent and impartial tribunal; b. impose a duty on the state to give effect to the rights in subsections (1) and (2); and c. promote an efficient administration. The Promotion of Administrative Justice Act (PAJA) flows from the Constitution.
PAJA … Constitution : Promotion of Administrative Justice Act (PAJA) No 3 of 2000 What is administrative action? “administrative action” means any decision taken, or any failure to take a decision, by— (a) an organ of state, when— (i) exercising a power in terms of the Constitution or a provincial constitution; or (ii) exercising a public power or performing a public function in terms of any legislation; or (b) a natural or juristic person, other than an organ of state, when exercising a public power or performing a public function in terms of an empowering provision, which adversely affects the rights of any person and which has a direct, external legal effect, but does not include …………..
PAJA (continued) PAJA 7. (1) Any proceedings for judicial review in terms of section 6 (1) must be instituted without unreasonable delay and not later than 180 days after the date— (a) subject to subsection (2)(c), on which any proceedings instituted in terms of internal remedies as contemplated in subsection (2)(a) have been concluded; (b) where no such remedies exist, on which the person concerned was informed of the administrative action, became aware of the action and the reasons for it or might reasonably have been expected to have become aware of the action and the reasons. (2) (a) Subject to paragraph (c), no court or tribunal shall review an administrative action in terms of this Act unless any internal remedy provided for in any other law has first been exhausted……..
PAJA (continued) 9. Variation of time.—(1) The period of— (a) 90 days referred to in section 5 may be reduced; or (b) 90 days or 180 days referred to in sections 5 and 7 may be extended for a fixed period, by agreement between the parties or, failing such agreement, by a court or tribunal on application by the person or administrator concerned. (2) The court or tribunal may grant an application in terms of subsection (1) where the interests of justice so require.
PAJA … some older case law Registrar of Pension Funds and FSB and Kwazulu Natal Retirement Fund and Midlands Building Industry Retirement Fund (KZN High Court Case 3469/2012) • issues with target pensions and valuation Funds, then submitted amended rules, providing for target level of pensions. Amendments registered in 2011 and funds informed of approval • Registrar sought to review the decisions to register • Considerations of public interest and the interests of the person in whose favour a decision was made. Value judgement, balancing all factors (Pepkor case) • Court found that the functionaries made a material mistake in registering (even though internal departments did not talk to each other), the reasons presented for the amendments incorrect and misleading.
PAJA … some older case law (continued)-collateral challenge SALA Pension Fund vs Msundusi Municipality (994/2013) [2015] ZASCA 172 (26 November 2015) • To found a claim for increased contributions under an amended rule the Fund had to prove that a resolution has been properly adopted, transmitted to the Registrar timeously and approved by him or her.See section 12(4). Fund could not prove that consolidated rules were based on a correctly adopted resolution, in terms of the PF Act and fund rules. Fund could not prove basis for a claim. SCA granted absolution of the instance. • [35] The Fund nonetheless argued that even if the Registrar’s approval was invalid, as an administrative act it stood and had legal consequences until set aside on review. It referred in this regard to Oudekraal Estates (Pty) Ltd v City of Cape Town & others 2004 (6) SA 222 (SCA) (para 26) where Howie P and Nugent JA held that an administrative act, despite being invalid, may have legal consequences until it is set aside. (See now also MEC for Health, Eastern Cape & another v Kirland Investments (Pty) Ltd t/a Eye and Laser Institute 2014 (3) SA 219 (SCA), confirmed by the Constitutional Court 2014 (3) SA 481 (CC).
PAJA … some older case law (continued) [36] This court said in Oudekraal, however, that when there is a valid collateral challenge to the validity of an act, a court has no discretion but to set it aside. “[37] In my view, the appellant has misconceived the position. As Oudekraal itself makes plain (para 36) “the right to challenge the validity of an administrative act collaterally arises because the validity of the administrative act constitutes the essential prerequisite for the legal force of the action that follows and ex hypothesi the subject may not then be precluded from challenging its validity.” Thus faced with the general denial of the kind encountered here, it remained for the appellant to prove the validity of the amendment, which was an essential feature of its claim.” Therefore, the reason why the Court found that the rule amendment could not stand until set aside was because it was not backed by a proper resolution, which was a prerequisite under section 12(4) of the Pension Funds Act, and it was therefore subject to a collateral challenge
PAJA Hortors PF Case-what is a decision/action? Hortors Group Pension Fund and Registrar of Pension Funds FSB Appeal Board Case A38/2015 • financial soundness of the fund in issue • Registrar wrote a ‘section 18 request’ to fund, because fund was in deficit, and requested a scheme consistent with the principles underlying section 18… as embodied in Circular PF 66, required a signed confirmation by the employer to abide by the valuator’s recommendations or submit a section 15(3)((presumably 18(3)) application Is a direction under section 18 a decision? SALA Pension Fund vs Registrar and Fairsure FSB Appeal Board case, quoting Judes vs District Registrar of Mining Rights, Krugersdorp 1907 TS 1046: ‘Now to ‘decide’ means to take it into consideration and settle it. And in the absence of any qualification in the statute it follows that the determination of a question by a person clothed with the right to decide it must be a final determination…’
PAJA: Hortors Group PF (continued) The effect is that ‘decisions’ in relation to steps that lead to a final determination are not appealable decisions. This also follows from the other jurisdiction requirement mentioned, namely that the decision must have been made under a power conferred or a duty imposed on the decision-maker by or under any law and which grants a right of appeal to any person aggrieved by the decision-maker.
What is a decision? … Hortors and SALA cases (continued) • In the SALA Appeal Board Case the Registrar directed questions to the board of the fund, each board member individually and the principal officer of the fund to determine their fitness, following an unsound financial transaction. It was held not to be an appealable decision; these were questions leading into an enquiry into their fitness for office. There was a punitive cost order against the appellants for the Fund bringing vexatious proceedings, i.e. wasting the time of the Appeal Board, among other things, and to use the fund to essentially ‘cover trustees’ • In the Hortors case the Appeal Board interpreted section 18 (1) and 18 (1A) in order to arrive as to whether a direction under section 18(1) amounts to a decision or not • Appeal Board ruled that to be a decision it must amount to a final determination and not merely a step towards the determination; in that case determining what it was were determined by the section 18 processes; all steps for a decision to be made by the Registrar in approving or rejecting the scheme were not completed yet.
Commencement of 180 period for PAJA review application AL Mostert NO and Registrar of Pension Funds, Chief Master of the High Court, Minister of Finance, Raymond Hislop… Gauteng Local Division, Case 07353, [2017] JOL 38845 (SCA) • application under PAJA to review and set aside Reg 35(4) (promulgated on 22 April 2003 by the Minister); regulation provides for compulsory transfer of unclaimed benefits in contingency reserve to a fund established by law • application brought outside 180 day period •no evidence presented by Mostert as to his knowledge or deemed knowledge, i.e. of when he reasonably ought to have become aware of the effect of the regulation on his fund •appointed as fund curator in October 2005, liquidator in April 2008 •surplus apportionment scheme approved on 11 May 2012, application brought on 27 March 2015 •Mostert not challenged on 180 day issue •but Minister raised 180 day issue in argument, and submitted that Court should take this into account mero motu (i.e. out of its own accord), submitted that at the very latest the 180 days started to run with the approval of the surplus apportionment scheme
PAJA … Mostert case (continued) High Court found as follows on the issue- • date of actual knowledge of the administrative action and the reasons for it is normally the primary source of knowledge • the applicant for review has to clear the hurdle; if nothing is said on the papers as to actual knowledge the applicant fails • consideration for locating the duty of actual knowledge on the applicant is in line with the context of the legislation; it is in the interests of the administration that finality be obtained about the lawfulness of administrative action. Uncertainty that might otherwise prevail offends the smooth running of a modern state. Duty to place evidence before court of actual knowledge therefore on the applicant
PAJA … Mostert case (continued) • duty to place before court evidence of deemed knowledge not necessarily on applicant, i.e. when applicant reasonably ought to have become aware of the administrative action • deemed knowledge generally irrelevant if there was actual knowledge, but could be relevant to fix a date earlier than actual knowledge, or where there is no evidence of actual knowledge • onus would have been on the Minister, but not needed in the present matter as Mostert had not put up a case for a date of actual knowledge • Mostert took the matter on appeal but lost and got a punitive cost order against him
Reg 34(5) the merits of the case underlying Mostert application Mostert raised the issue of collateral challenge (ref Oudekraal case) to the validity of an administrative act (i.e. the regulation) Court has no discretion to either allow or to disallow the raising of the defence. The validity of the administrative act is the prerequisite for the legal force which follows. Applied in alternative for an appropriate declaratur. Court found that collateral challenge does not apply where the applicant took the initiative and applied for the review of the action itself, as the court has the power to grant or not to grant the relief, otherwise collision between legality and certainty. Even if Mostert cleared the time thresholds, he would still have to prove that legality would triumph over certainty. ‘’Given the passage of time since 22 April 2003 that would have been a difficult row to hoe.’’ …….. “the anticipated collateral challenge is best served by this court not attempting to investigate whether a declaratur would be appropriate in the circumstances.
Reg 34 (5) … Merits of the Mostert application (continued) Is Reg 35(4) inconsistent with Section 15B (5)(e)? •Mostert argued that both the section and regulation deal with the allocation of the entitlement to additional benefits of members and former members whose benefits are calculable •the section gives the board of a fund the power to deal with it in its discretion; the regulation compels the board to establish a contingency reserve account as envisaged •submitted that these are inconsistent and the Minister may only make regulations which are not inconsistent with the Act
Reg 34 (5) … Mostert Case (continued) Section 15B(5)(e) ………….. (e) the board shall determine how, in the case of existing members and former members, the allocated portion of actuarial surplus shall be applied for their benefit, including the crediting of any portion to the members’ surplus accounts or to the members’ individual accounts, as the case may be: Provided further that the board may allocate a portion of the actuarial surplus to be used for former members to a contingency reserve account which will be used to satisfy the claims of former members - (i) who have been identified in subsection (4)(a) but who cannot be traced; or (ii) who did not substantiate their claim during the nine-month period following the advertisement in subsection (4)(a)(iii) but who do so after the end of this period; and ……………..
Reg 34 (5) … Mostert case (continued) Reg 35 (4) Where a board is able to determine the enhancement due in respect of a particular former member in terms of section 15B (5) (b) or (c) of the Act, but is unable to trace that former member in order to make payment, the board shallput the corresponding enhancement into a contingency reserve account specific for the purpose. Notwithstanding anything in the rules of the fund, moneys may not be released from such contingency reserve accounts except as a result of payment to such former members or as a result of crediting the Guardians Fund or some other fund established by law to include such amounts.
Reg 34(5)… Mostert case (continued) Judge expressed his views Contingency reserve envisaged in s15B.(5)(b) may be used, in the discretion of the board to receive portion of the surplus to be used for former members - •whose individual records cannot be calculated for lack of records, or •supplied late by former members, or •also for those former members whose individual records cannot be calculated for lack of records because these members cannot be traced at all.
Reg 34 (5) … Mostert case (continued) • Legislature was aware of the untraceability of former members, but only in the context of the inability to calculate their benefits for lack of proper records, at the stage that the scheme is being designed-see 15B(5)(e) • 15B does not address the issue of the ability to pay or not • Reg 35(4) addresses the issue of members whose benefits have been calculated, but who cannot be traced in order to make payment • Therefore no inconsistency between 15B and the regulation • The regulation only becomes applicable after the approval of the surplus apportionment scheme; deals with a different class of members for a different purpose, and a compulsory transfer to an unclaimed benefit fund is only made at the time that payment cannot be effected
Reg 34(5) … Mostert case (continued) Are the characteristics of the contingency reserve account inconsistent with the Act? •Mostert argued ……. • “contingency reserve account”, in relation to a fund, means an account provided for in the rules of the fund, which has been amended in accordance with the requirements of the registrar, or which has not been disallowed by the registrar, and to which shall be credited or debited such amounts as the board shall determine, on the advice of the valuator where the fund is not valuation exempt, in order to provide for a specific category of contingency; •therefore that contingency reserve account in reg35(4) must bear the same meaning as the definition section of the Act, which it is not, and therefore it is ultra vires
Reg 34(5) … Mostert case (continued) But Court found that •the meaning that has been assigned to contingency reserve account in the Act self-evidently qualified by context. Internal qualifier gets there by proper interpretation of the definition of the concept as it appears in the Act •no substantive rights and obligations established, even if concept in regulations are the same as in the Act •concept in the regulation falls in the ambit of section 36(1)(c), i.e. the power of the Minister generally to make regulations as to all matters he considers necessary or expedient to prescribe in order that the purpose of the Act may be achieved
PAJA Free State Municipal Pension Fund Case Free State Municipal Pension Fund v Minister of Finance, FSCA and Others (67954/2015)[2018] ZAGPPHC 404 (6 June 2018) • SAS submitted to Registrar, as at 30 June 2011 • Fund wanted to revert surplus allocated to contingency reserve account as per Reg 35(4) account back; instructed by Registrar to reverse their decision and to bring fund back to neutrality • Review application, fund wanted condonation for late submission; argued in the alternative that there is no time limit on a collateral challenge; asking that the regulation be declared null and void • Court followed argument of SCA as to the merits/validity of the regulation, i.e. on the interplay between section 15B and Reg 35(4); this was relevant as to the changes of getting condonation • distinction between allocations that cannot be made and benefits that have been calculated but cannot be paid, reg 35(4) not in conflict • Court rejected argument of the Fund that the Registrar gave it the impression that he will not enforce the regulation
Free State Mun PF Case (continued) • Court agreed with the Minister’s argument, that the application to Court was couched as an application for review of the promulgation of the regulation under PAJA; therefore way out of time • but the Court also found that it does not make a difference in the end result, if it were to be a collateral challenge in this instance • referred to the Merafong* case • Judge Cameron said that whether under PAJA, or a legality review, applicant in that matter was obliged to institute review proceedings without unreasonable delay • generally no time bar on collateral challenge if the law is of general application and is possibly unknown to person against whom action is sought (such as in criminal matter), but where applicant knows of it the interests of justice come into play stronger, and the court has to be satisfied that it is served by granting condonation • S9 of PAJA refers to the interests of justice justifying condonation (one of which could be the merits of the case) * Merafong City Local Authority v Anglo Gold Ashanti Limited 2017 (2) BCLR 182 (CC); 2017 (2) SA 211 (CC)
Free State Mun PF Case (continued) • application by Free State Mun PF was launched 12 years after the promulgation of the regulation, which the Fund elected to ignore • Fund knew about the regulation and its explanation for the delay in acting did not pass muster, reasons unconvincing, and self-serving • Fund could not explain delays for 8/12 years, and also could not show that there would be no prejudice to other parties • If granted, vested rights of beneficiaries would be severely affected, if transactions giving them rights had to be reversed • British American Tobacco Pension Fund v Howie NO and Others *(fund could not use balance in MSA to reduce deficit which arose after the approval of SAS • see also s15A(2) • gross failure of the applicant so bad that the merits of the case/possible success did not even come into play * [2016] ZASCA 138, [2016] 4 All SA 812 (SCA)
Free State Mun PF Case (continued) Fund also tried to argue that Reg 35(4) is irrational To test rationality the courts look at whether there is a legitimate government purpose, rational connection between the legislative measure/means applied, and the pursuit of a legitimate government purpose. The Courts will not substitute its opinion as to what is appropriate for the opinions of those in whom the powers are vested, even though less restrictive means could have been used to achieve the purpose. The Court found that the purpose of the regulation was for a fund to be financially sound and to meet claims by former members.
PAJA: Condonation and Internal Remedies….Eskom Pension and Provident Fund Case Vusi Elgien Ndhlovo and ESKOM Pension and Provident Fund, Pension Funds Adjudicator, Hope Mirriam Shabangu, Gabisile Precious Makhoba, Gzanele Universe Makhoba. North Gauteng High Court case number 31082/2015 • review application by Mr. Ndhlovo to set aside the second s37C allocation of benefits • Applicant effectively asked Court to make an equitable distribution rather than to remit the matter back to the funds • part of relief sought was that a declaration by the PF Adjudicator, that it could not entertain any further correspondence with Applicant was premature, and that it should have issued an interim order • further sought condonation for filing the review after more than 180 days • Fund objected to condonation application and also raised a point in limine that Applicant had failed to exercise his internal remedies first
PAJA:ESKOM case (continued) • Applicant’s deceased father was the fund member, divorced from mother, 3rd Respondent was spouse by customary law (nominated for 100%), 4th and 5th Respondents were daughters of the sister of the deceased member who received financial support • Fund was unaware of Applicant until he lodged the legal challenge in the form of a complaint to the PF Adjudicator • PFA Adjudicator set aside the first allocation and remitted it back to the funds for reconsideration • Second allocation followed: 20% to Applicant, 60% to spouse and 10% each to the nieces
PAJA: ESKOM case (continued) Time limits and condonation ……. • undisputed that PAJA is applicable; both the fund and PF Adjudicator are public bodies performing a public function and their decisions constituted administrative action • review application to be instituted without unreasonable delay and within 180 days from- • the conclusion of internal remedies, or • if none available, from the earliest of the date that the affected party was informed, or should reasonably be expected to be informed of the decision • Applicant stated that he first became aware of the 2nd allocation on 17 August 2017, filed review application in excess of 100 days late. Told Court that he was sent from pillar to post by the fund when making enquiries, deposit required by attorneys, reluctant to use funds received, no effort to extend the review period by agreement, also did not explain what circumstances changed to make him able to make a payment in April 2016
PAJA: ESKOM case (continued) ‘’( 6] Condonation is a discretion to be exercised according (to) the interest of justice. This is succinctly elucidated as follows: ‘The standard for considering an application for condonation is the interests of justice. Whether it is in the interests of justice to grant condonation depends on the facts and circumstances of each case. Factors that are relevant this enquiry include but are not limited to the nature of the relief sought, the extent and cause of the delay, the effect of the delay on the administration of justice and other litigants, the reasonableness of the explanation for the delay, the importance of the issue to be raised, in the intended appeal and the prospects of success.’ Van Wyk v Unitas Hospital and Another 2008 (2) SA 472 (CC); ’’
PAJA: ESKOM case (continued) • S 7(2) and (b) of PAJA are stringent in providing that a court must direct a person to first exhaust any internal remedy before instituting review proceedings • Applicant did not lodge a complaint against second distribution, under s30A of the Pension Funds Act; no explanation why he disregarded a much simpler, quicker, cheaper and more accessible option • neither did Applicant pursue the option of s30P, to apply to the High Court for relief; PFA was functus officio • explanation for delay to bring review proceedings were also unconvincing, cannot be viewed in isolation of his wilful failure to follow internal remedies and the lack of prejudice to him in not being suited in this court. • grounds for relief vague and unspecified as to the irregularities or misdirection committed by the fund and the Adjudicator • application dismissed with costs
ANOTHER MOSTERT CASE Mostert and Others v Nash and Another (604/2017 and 597/2017)[2018] ZASCA 62 (21 May 2018) • Tony Mostert was appointed curator of the Sable Industries Pension Fund, following illegal surplus stripping exercise involving the so-called Ghavalas option, under Financial Institutions (Protection of Funds) Act of 2001 (‘FI Act); all happened before enactment of the so-called surplus legislation • surplus money moved to Lifecare Group Holdings Pension Fund, after the purchase of annuities for pensioners, leaving the Sable fund with 4 members and the surplus of R36 million • agreement whereby Midmacor (second respondent and participating employer) sold to Lifecare Group Holdings Limited the entire issued share capital of its subsidiary Pro-Base for a price of R34.56million • business of the Sable Fund was merged with that of the Lifecare Fund • Midmacor had to warrant that the financial statements as at the effective date would fairly represent the assets and liabilities of the fund, i.e. warranting that the surplus would in fact exist
PAJA: Mostert and Nash (continued) • s14 transaction, and Lifecare assigned to the Lifecare Fund its obligations under the sale agreement with Midmacor in respect of the Pro-Base shares, which obliged the Lifecare Fund to pay Midmacor the purchase price of R34.56 million • some further deals in terms of which dividends got paid out to Soundprops, company of Ghavalas, and Midmacor, controlled by a CC of which Nash was the sole member, and a family trust in the Nash stable • all in all, Pro-Base was a dormant company, simulated transactions, and surplus ‘unlocked’ to pay for that, thereby depriving the pensioners from sharing in it in that they were outsourced (even there were fraudulent misrepresentations) • the Sable fund was left without any assets, and Mostert proposed to drive the litigation on a contingency basis; i.e. him as curator and his attorneys’ firm sharing in amounts recovered
Mostert and Nash (continued) • in the curatorship application Judge Poswa of the North Gauteng High Court appointed Mostert as curator of the Sable Pension Fund • part of the terms of his appointment was that he shall be entitled to periodical remuneration in accordance with the norms of the attorneys’ profession (as agreed with the Executive Officer of the FSB),…. to be paid from the assets owned, administered or held by or on behalf of the Fund,…. • Mostert concluded an agreement with the FSB to be paid remuneration at the rate of 33% of assets recovered (split 50/50 between him and his company AL Mostert and Associates) • as Mostert recovered money, there was a further MOU in terms of which the fee would be in in accordance with the norms of the attorneys’ profession, up to liquidation, whereafter section 28 would apply • Nash challenged the validity of this agreement, alleging that it was not in accordance with the norms of the attorneys’ profession; in essence the challenge was about the validity of the agreement • application brought well after 180 days of Nash becoming aware of it
Mostert and Nash (continued) • Mostert, among other things, took the point that the agreement was not covered by the Contingency Fees Act (allowing 25% of asset recovery by attorneys in litigious matters), as he was acting as curator • debate about what the norms of the attorneys’ profession are. Would it be subject to the maximum of 25% too, per hour billing, or what? • High Court set aside the fee deal as void ab initio and ordered Mostert to repay, hence the appeal. SCA also found that the agreement was unlawful, being against the Poswa order • but the SCA (in the majority judgment) on that point considered that he was entitled to some fee to be determined. Normally attorneys would work on hourly rates, determined by seniority, experience, etc. A percentage of assets per se was not necessarily unacceptable or against the norms of the profession, but it would amount to a departure from the Poswa order in this matter, and had to be sanctioned by the Court under section 5(5)(c) of the FI Act. A court would look at the reasonableness, having regard to risks undertaken, work involved, uncompensated costs to Mostert and his firm. The remuneration therefore had to be considered afresh and approved by a court
PAJA: Mostert and Nash (continued) Important legal issues under PAJA • did the entering into the fee agreement constitute administrative action by the Registrar, as envisaged under PAJA? • whether or not, was condonation of late submission warranted? Mostert • Mostert took the point that the effecting of the agreement amounted to administrative action • application for review submitted more than 30 months after Nash became aware of the order appointing Mostert and the fee arrangement, therefore out of time Nash • Nash took the point that the only question was whether the agreement complied with Par 9 of the Poswa order • if it did it was the end of the matter. If not, appropriate declaratory relief as a consequence was sought
PAJA: Mostert and Nash (continued) Majority judgment • it was not administrative action under PAJA, as maintained by Mostert. The FSB and the Registrar entered into the agreement pursuant to a court order under s5(5)(c) of the FI Act in respect of the remuneration; the only function of the FSB was to agree to the remuneration in accordance with the norms of the attorneys’ profession, not to procure his services on behalf of the FSB or any other organ of state • further, Nash and Midmacor had locus standi (they could potentially benefit from the recoveries, and also under s5(8) of the FI Act … any person, on good cause shown… may make application under the Act) and • condonation was warranted (under common law) because among others pensioners and former fund members had an interest in the outcome of the dispute pertaining to the validity of the agreement, and Mostert alleging that Nash only instituted proceedings to delay the matter was met with a lot of scepticism • Mostert’s argument about problems with ‘unscrambling the egg’ on fees was also not met with any sympathy; the only party to be prejudiced was himself and his firm. And the fees taken were substantial, and pensioners and former members had an interest in how much was available for recovery • but Mostert and others still succeeded in that the SCA set aside the order of the High Court as regards to him having to pay back all his remuneration; ruled that it had to be determined anew, and that taking a percentage of assets was not necessarily problematic
PAJA: Mostert and Nash (continued) Minority judgment • the agreement for the remuneration amounted to administrative action under PAJA • Nash and Midmacor out of time, no good reason to extend the period instituting proceedings • agreements for contingency fees of kind in question not unlawful, even though unsettling questions may have arisen as to the rate of remuneration and the quantum of the fees • no evidence before court as to reasonableness of fees • the crisp issue is whether the agreement should be declared invalid • section 5(8)(a) of the FI Act allows for any person, on good cause shown, to make application to Court to set aside or alter ….. any decision by the Registrar or the curator • Nash and Midmacor had sufficient reason, but does 5(8)(a) create a separate basis for review, standing apart from PAJA? • and was this a review or merely a declarator interpreting an order of court?
PAJA: Mostert and Nash (continued) minority judgment (continued) • court a quo accepted that Nash had the intention to stab a dagger in the heart of the curatorship (i.e. unclean hands), but it was in the highest degree of interest that complaints about the remuneration of a public officer such as a curator should be ventilated and that appropriate relief should apply if the complaint is well-founded • the degree of public interest is in turn relevant as to whether extension should be granted in respect of the 180 days for submission of review application, where the interests of justice or require (or by agreement between the parties) • the mere fact that an act may derive from or purport to derive from a court order does not necessarily deprive it from its administrative character; i.e. not isolated from the law of review; the fact that when a court authorises or forbids an organ of state to perform an administrative act or forbids it does not mean that the act which follows can escape judicial scrutiny under review • Walele v City Council of Cape Town and others …* ‘All statutes which authorise the making of administrative action must now be read with PAJA unless their provisions are inconsistent with it’ (minority judgment but majority did not seem to disagree with it) * 2008 (6) SA 129 CC
PAJA: Mostert and Nash (continued) minority judgment (continued) • majority judgment in AllPay Consolidated Investment Holdings (Pty) Ltd vs The Executive Officer, South African Social Security Agency & Others…. ‘ *Once a particular administrative process is prescribed by law it is subject to the norms of procedural fairness codified by PAJA, this, it seems to me, must apply to the agreement.’ • S 5(8)(a) of FI Act is not one of these cases where an exception is transparently evident and unambiguously applied • S5(8)(a) good cause shown refers to the reason to be heard, not the substantive merits; it is an enabling provision • Courts should not be indulgent to allow applications for review beyond prescribed period; substantive merits (lawfulness of the agreement in this matter) may be relevant but not always linked to the reasons for the delay • does not necessarily follow that, because the CFA applies to litigious matters, a residual prohibition against legal practitioners in non-litigious matters applies; mischief against which must be guarded is champerty, i.e. gambling on outcome • onus on Nash and Midmacor; no evidence before court as to unreasonableness, collusion between Mostert and Registrar, condonation therefore also not granted • appeal should have been upheld, with costs, including the costs of two counsel *[2013] ZACC 42; 2014(1) SA 604 CC
Some considerations emanating from case law • there has to be a decision/action that is contested • actions/enquiries leading to decisions are not reviewable/appealable • beware of collateral challenges • not following procedures is likely to land you in trouble • always disclose all relevant facts, otherwise the Registrar may apply for review and the setting aside of his own decision • always ensure compliance with prescribed timelines (see Mostert, Free State Municipal Pension Fund and Eskom cases) • condonation is not guaranteed • always exhaust internal remedies first (appeal to Trinunal, etc.), don’t jump the gun! • be clear on the basis for application to court, i.e. review or collateral challenge
“New” surplus, section 15C Moor and Hazewindus and The Tongaat-Hullett Pension Fund, The Tongaat-Hulett Defined Benefit Pension Fund, Tongaat-Hulett Ltd and the Registrar of Pension Funds (518/17) [2018] ZASCA 83 (31 May 2018) • central issue what whether 2nd Respondent contravened s15C when it allocated R362.2 million to the employer surplus account (ESA) in 2012 • Appellants were former members and trustees of 1st Respondent, predecessor to 2nd Respondent (the Fund) • Fund was established with effect from 1 November 2010 after the unbundling of 3rd Respondent and Hulamin • pursuant to conversion and restructuring scheme under section 14 the pensioners were outsourced to Old Mutual, in 2013. Membership of Appellants terminated • Registrar approved the scheme as reasonable and equitable and according full recognition of the rights and reasonable benefit expectations of members and pensioners, also approved Rule 11.5 on 31/12/2013; this part of the exercise was not under attack
S15C-Moor case (continued) • complaints against 2007, 2009 and 2012 surplus distributions dismissed by the PF Adjudicator • In respect of the 2012 apportionment the PF Adjudicator found that the interests of all stakeholders were taken into account when future surplus allocated exclusively to the ESA • Appellants approached the High Court for condonation of late institution of action, setting aside decision of the PFA, setting aside the decision of the board of the Fund to allocate surplus to ESA, alt in such amount as was in fact allowed in terms of Rule 11.5.4.1(b), directing the board of the Fund to apportion surplus in terms of section 15C(2), i.e. under surplus legislation, and hence directing Fund to take into account the interests of all stakeholders as per s15C(2), prior allocations in 2007 and 2009, and allocation of any surplus in existing surplus as at 30/6/2012 that may have been allocated to members of the Fund (if any) upon their transfer out of the Fund, and another prayer in terms of costs • relief sought only in respect of the 2012 apportionment, although previous allocations relevant due to size of amounts involved
S15C-Moor case (continued) • rules referred to ‘excess assets’ comprising some R1.816billion • 80% to current members, former members and pensioners • 20% to ESA • resolution of the board which brought about the scheme and the rule amendment was based on the proposal of a task team lead by Fund’s actuary Howard Buck • all in-service members and 90% of pensioners approved the scheme, following a communication exercise • main thrust of the challenge in the High Court was that the 2012 surplus apportionment was overstated in terms of section 15C and the Fund failed to discharge its obligations towards the members including Appellants as pension members before allocating the surplus to the ESA • Appellants also maintained that excess assets was not actuarial surplus, transfer to ESA therefore under Rule 11.5 therefore ultra vires, unlawful and to be set aside
S15C-Moor case (continued) “employer surplus account”, in relation to a fund, means an account provided for in the rules of the fund to which shall be credited— (a) amounts allocated by the board in terms of sections 15B, 15C and 15F or transferred into the fund for the credit of the account in terms of section 15E (1) (e); (b)such contributions as are specified in the rules to be credited to this account; and (c)fund return on the balance in the account from time to time: Provided that the board may elect to smooth the fund return, and to which shall be debited— (d)any actuarial surplus utilised by the employer; and (e)any actuarial surplus transferred to any other account in the fund at the request of the employer or transferred to another fund in terms of section 15E (1) (e);
S15C-Moor case (continued) “stakeholder”, in respect of a fund, means a current member, including a pensioner and a deferred pensioner, a former member and an employer participating in the fund;
S15C-Moor case (continued) 15C. Apportionment of future surplus.—(1) The rules may determine any apportionment of actuarial surplus arising in the fund after the surplus apportionment date between the member surplus account, the employer surplus account or directly for the benefit of members and former members subject to the uses specified in section 15D (1). (2) If the rules are silent on the apportionment of actuarial surplus arising after the surplus apportionment date, any apportionment between the member surplus account, the employer surplus account or directly for the benefit of members and former members, subject to the uses specified in section 15D (1), shall be determined by the board taking into account the interests of all the stakeholders in the fund: Provided that, notwithstanding anything to the contrary in the rules, neither the employer nor the members may veto such apportionment.
Moor case (continued) The issues- • was the R363.2 million, on the facts, actuarial surplus? • is Rule 11.5 a rule contemplated in s15C(1), or • if not, has s15C(2) been complied with? SCA set out the historical context of the section. Also referred to par 46-47 of Directive PF 3, issued in 2009 under BN22: ‘46. Where the board determines, following approval by the Registrar of a surplus apportionment scheme or after the noting of a nil return, that an amount set up as at SAD or the effective date can be released from a contingency reserve account, such amount released creates future surplus and this surplus may be apportioned in terms of section 15C of the Act. 47. Section 15C determines how “future surplus” may be distributed between the member and employer surplus accounts, and will be dealt with in terms of the rules, or, where the rules are silent, by a decision of the board taking into account the interests of all the stakeholders in the fund.’
Moor case (continued) As to whether the amount allocated was surplus, i.e. on the factual question, two important principles to bear- • an appeal to the High Court against the decision of the PF Adjudicator is an appeal in the widest sense of the word, i.e. a court can reconsider the matter afresh and make any order it deems fit ………………………. SCA referred to the definition of actuarial surplus in section 1 of the Pension Funds Act, and of reserve account and contingency reserve account.
