R13M WHAMMY

Nd­lambe must cough up money for re­tire­ment fund

Talk of the Town - - Front Page - JON HOUZET

Nd­lambe Mu­nic­i­pal­ity has to come up with more than R13m to pay the Mu­nic­i­pal Work­ers Re­tire­ment Fund af­ter fail­ing to pay the full amount it was obliged to pay over a pe­riod of six years

Of the money the Gra­ham­stown High Court (it is still called that) or­dered the mu­nic­i­pal­ity to pay to the Fund, R9,705,745 is in­ter­est.

In her judg­ment on Novem­ber 22, Judge Ju­dith Roberson said: “It is com­mon cause that dur­ing the pe­riod July 2007 to Fe­bru­ary 2013 the mu­nic­i­pal­ity did not pay to the fund the full amount it was obliged to pay in terms of the ap­pli­ca­ble sched­ule to the rules of the fund, both in re­spect of the mem­bers’ con­tri­bu­tions and the mu­nic­i­pal­ity’s con­tri­bu­tion”.

The to­tal short­fall for the mem­bers’ con­tri­bu­tion was R1,159,843 and the to­tal short­fall for the mu­nic­i­pal­ity’s con­tri­bu­tion was R2,783,588.

The in­ter­est charged was com­pound in­ter­est and con­sti­tutes in­vest­ment in­come for a fund.

The mu­nic­i­pal­ity raised two spe­cial pleas in de­fence – that of pre­scrip­tion (when the re­quired time­frame in which to re­cover a debt has passed), and non-com­pli­ance with sec­tion 3 of the In­sti­tu­tion of Le­gal Pro­ceed­ings against Cer­tain Or­gans of State Act.

Roberson said the lat­ter plea was cor­rectly not pur­sued, as the fund was not claim­ing for dam­ages.

In its plea-over, Nd­lambe pleaded that it had paid to the Fund the amounts which it had de­ducted from the mem­ber’s re­mu­ner­a­tion in ac­cor­dance with the sched­ule; that it could not be held li­able for amounts which had not been de­ducted from mem­ber’s re­mu­ner­a­tion; that it had paid its own con­tri­bu­tion – but in the event it was found li­able for the short­fall, it should not be held li­able for in­ter­est be­cause it was not aware that it was payable at the rel­e­vant time; and that pay­ment should ex­clude con­tri­bu­tions on be­half of em­ploy­ees who are no longer in the em­ploy­ment of the mu­nic­i­pal­ity.

It also pleaded that the fund bore re­spon­si­bil­ity to no­tify the mu­nic­i­pal­ity and its em­ploy­ees of any short pay­ment and be­cause it did not do so, the mu­nic­i­pal­ity be­lieved its con­tri­bu­tions were cor­rect.

In ex­am­i­na­tion of prece­dent in a sim­i­lar case, Roberson said the mu­nic­i­pal­ity had ac­knowl­edged its statu­tory obli­ga­tion through the monthly pay­ments it made for the pe­riod in ques­tion.

“The fact that there was a short­fall and that it be­lieved it was pay­ing the cor­rect amounts each month does not de­tract from this ac­knowl­edg­ment.

“It fol­lows, as stated by He­her JA, that there has been a con­tin­u­ing and on­go­ing in­ter­rup­tion of pre­scrip­tion in re­la­tion to ev­ery amount which the mu­nic­i­pal­ity was obliged to pay to the fund,” the judge said.

Roberson found that the de­fence of pre­scrip­tion could not suc­ceed.

She dis­agreed with the mu­nic­i­pal­ity’s con­tention that it could not be held li­able for amounts which it did not deduct from its mem­bers’ re­mu­ner­a­tion.

“Con­tri­bu­tions re­ceived by the Fund are in­vested in the best in­ter­ests of its mem­bers, and it is crit­i­cal there­fore that the cor­rect amounts are paid,” Roberson said.

As for the mu­nic­i­pal­ity’s be­lief that it was pay­ing the cor­rect amounts, the judge said a mis­taken be­lief can­not be a de­fence in the cir­cum­stances of the case.

“If the mu­nic­i­pal­ity was able to rely on a mis­take, it would be to the detri­ment of the em­ploy­ees who are en­ti­tled to their full pen­sion ben­e­fits in terms of the PFA [Pen­sion Funds Act] and the rules of the Fund,” she said.

“For the same rea­son the mu­nic­i­pal­ity can­not on this ground avoid pay­ment of in­ter­est of the short­fall, just be­cause it was not aware that in­ter­est was payable at the time.”

She said the fund was un­der no obli­ga­tion to no­tify the mu­nic­i­pal­ity of the short­fall.

Roberson also said the pay­ment claimed could not be re­stricted to those mem­bers who are cur­rent em­ploy­ees.

“There will have been mem­bers who have since re­tired in re­spect of whom the in­cor­rect con­tri­bu­tions were paid.

“The cur­rent pen­sions they re­ceive will have been af­fected by the short­fall and will have to be ad­justed,” she said.

Nd­lambe was or­dered to pay to the Fund R13,649,186.21 to­gether with in­ter­est thereon at the repo rate plus 1/3 thereof plus 8%, capped at 20% per an­num, from Septem­ber 28 2018 to date of pay­ment.

Nd­lambe also has to pay costs, in­clud­ing wasted costs of Novem­ber 6, as the mat­ter had to be post­poned for a day.

The judge said a mis­taken be­lief can­not be a de­fence in the cir­cum­stances of the case

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