With­held pen­sion: fund loses case

Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

MARTIN HESSE

The Supreme Court of Ap­peal has dis­missed an ap­peal by a re­tire­ment fund against a judg­ment by the Gaut­eng High Court sup­port­ing the dis­cre­tion of the Pen­sion Funds Ad­ju­di­ca­tor to de­ter­mine how and from what date a fund must cal­cu­late in­ter­est on a pen­sion ben­e­fit it has been or­dered to pay out.

Ac­cord­ing to the judg­ment, dated June 1, the Na­tional Ter­tiary Re­tire­ment Fund (NTRF) had sought to over­turn a rul­ing against it by the ad­ju­di­ca­tor, Mu­vhango Lukhaimane, in the case of a for­mer mem­ber, Pro­fes­sor Aubrey Mokadi, who, un­til 2006, was the rec­tor and vicechan­cel­lor of the Vaal Univer­sity of Tech­nol­ogy.

The univer­sity dis­missed Mokadi after an in­ter­nal dis­ci­plinary tri­bunal found him guilty of mis­con­duct, in­clud­ing fraud, cor­rup­tion, and abuse of power.

Sev­eral le­gal bat­tles fol­lowed, all of which ul­ti­mately proved un­suc­cess­ful. The univer­sity laid crim­i­nal charges against Mokadi and in­sti­tuted a civil ac­tion for dam­ages of over R6 mil­lion. Mokadi, in turn, fought to be re­in­stated and pur­sued a civil case of his own against the univer­sity.

In 2009, Mokadi was ac­quit­ted in the crim­i­nal case. The civil case was to be heard on June 2, 2010, but it floun­dered. In July 2012 the univer­sity told the NTRF that it had dropped the case.

Mean­while, in Jan­uary 2010, with the civil case still pend­ing, Mokadi lodged a com­plaint with the ad­ju­di­ca­tor against the NTRF and his for­mer em­ployer, be­cause his pen­sion ben­e­fit had been with­held, and his em­ployer had made sev­eral de­duc­tions from the ben­e­fit to set­tle le­gal costs for which Mokadi was li­able. (A fund is permitted to with­hold a mem­ber’s ben­e­fits on dis­missal pend­ing the out­come of crim­i­nal or civil cases against the mem­ber where the em­ployer has suf­fered a loss. On proof of guilt, an em­ployer may make de­duc­tions from the mem­ber’s ben­e­fit in com­pen­sa­tion for the loss.)

In Septem­ber 2012, the ad­ju­di­ca­tor ruled in Mokadi’s favour, or­der­ing the NTRF to com­pute his with­drawal ben­e­fit, to­gether with in­ter­est at 15.5 per­cent a year, from June 2, 2010 (the ini­tial court date of the civil case) to the date of pay­ment.

On Oc­to­ber 1, 2012, Mokadi’s pen­sion ben­e­fit was fi­nally paid into his bank ac­count. Mokadi re­ceived a state­ment that showed an amount of R597 739 in re­spect of “late pay­ment in­ter­est”. This did not rep­re­sent the in­ter­est as or­dered by the ad­ju­di­ca­tor, but the fund’s in­vest­ment re­turn.

De­spite its ( wrongly cal­cu­lated) pay­out to Mokadi, the NTRF ap­pealed the ad­ju­di­ca­tor’s de­ci­sion at the High Court.

Mokadi lodged a counter-ap­pli­ca­tion (the ad­ju­di­ca­tor is not permitted to de­fend her de­ter­mi­na­tions), ask­ing the court to al­low in­ter­est on his ben­e­fit to be cal­cu­lated from Novem­ber 27, 2006 (the date on which a tax di­rec­tive was is­sued in re­spect of the ben­e­fit), as op­posed to June 2, 2010, as de­ter­mined by the ad­ju­di­ca­tor.

Both the fund’s ap­pli­ca­tion and Mokadi’s counter-ap­pli­ca­tion were dis­missed by the Gaut­eng court, which ruled that the ad­ju­di­ca­tor was statu­to­rily em­pow­ered to de­ter­mine the date from which in­ter­est would ac­crue and the rate of in­ter­est.

The NTRF took the mat­ter to the Supreme Court of Ap­peal. It con­tended, first, that it was not li­able for the in­ter­est be­cause it had law­fully with­held Mokadi’s ben­e­fit pend­ing the fi­nal­i­sa­tion of the civil ac­tion, and sec­ond, that be­cause it had paid Mokadi the “fund re­turn” on his ben­e­fit to the date of pay­ment, the pay­ment of in­ter­est meant Mokadi would re­ceive a “dou­ble ben­e­fit”.

The Supreme Court of Ap­peal ruled that the Pen­sion Funds Act did not pre­clude the ad­ju­di­ca­tor from ap­ply­ing the pre­scribed rate of in­ter­est (15.5 per­cent at the time), if she con­sid­ered it to be ap­pro­pri­ate in the cir­cum­stances of a par­tic­u­lar case, or a dif­fer­ent in­ter­est rate if more ap­pro­pri­ate.

In deter­min­ing the date from which in­ter­est must ac­crue, the court said the ad­ju­di­ca­tor may, again, choose from op­tions that were fair and ap­pro­pri­ate.

The judg­ment re­port states: “Mokadi’s ben­e­fit was orig­i­nally due to him in July 2006, when his em­ploy­ment with the univer­sity was ter­mi­nated. At that stage, the fund’s jus­ti­fi­ca­tion for with­hold­ing the ben­e­fit was that the univer­sity had charged Mokadi with fraud and cor­rup­tion.

“When Mokadi was ac­quit­ted of these charges, the fund then sought to jus­tify the with­hold­ing of his ben­e­fit on the ba­sis of the pend­ing civil ac­tion. The fund was aware that the civil ac­tion was set down for hear­ing on June 2, 2010. It nonethe­less, adopted a supine at­ti­tude and sim­ply made no ef­fort to en­quire from the univer­sity what the sta­tus of the civil ac­tion was sub­se­quent to that date, un­til an en­quiry from the ad­ju­di­ca­tor in July 2012.”

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