The Constitutional Court on Wednesday set aside the Supreme Court of Appeal’s order that found the Municipal Employees’ Pension Fund’s amended rule could apply retroactively to all withdrawal benefits that accrued to members as of April 2013.
In a unanimous judgment, Judge Jody Kollapen granted and upheld the appeal lodged by former Vhembe District Municipality employee Pandelani Midas Mudau to the apex court after he lost an appeal in the SCA.
The matter arose from a withdrawal benefit claim from the Municipal Employees’ Pension Fund made by Mudau.
According to court papers, prior to 2013, the pension fund’s rules provided that a member’s withdrawal benefit would be three times a member’s contribution with interest.
However, in January 2013, the fund received an actuarial valuation report which warned that it was at risk of failing to meet its future liabilities due to, among other things, the calculation of its withdrawal benefits.
In June 2013, a decision was made by the fund’s board to amend the rule to provide that a member’s withdrawal benefit would be one and a half times a member’s contributions with interest.
“The unregistered amended rule further provided that the amendment would have retrospective effect from 1 April 2013.
“On 22 July 2013, the Fund made an application to the Registrar to register the unregistered amended rule,” court papers read.
Mudau, who had resigned on 31 May 2013, was paid a withdrawal benefit of R646 437.42 in October 2013, in terms of the unregistered amended rule pending registration of the new rule by the pension fund registrar.
He alleged that he was entitled to receive R2 140 313.19 in terms of the old rule and referred a complaint to this effect to the Pension Funds Adjudicator in December 2013.
The Pension Fund Adjudicator ruled that the unregistered amended rule could not be applied until it had been approved and registered by the registrar.
The fund was ordered to pay Mudau the balance to which he was entitled under the old rule, together with interest.
The pension fund and Akani Retirement Fund Administrators appealed the adjudicator’s determination in the high court and the full bench without success until the SCA found that the Pension Act authorised the fund to amend its rules and to determine the effective date of application of the amended rule.
The SCA also found that the amended rule could apply retroactively to all withdrawal benefits which had accrued to the fund’s members as of April 2013, the date stipulated in the amended rule approved by the registrar.
Unhappy with the order, Mudau brought an application to the Constitutional Court for leave to appeal the whole SCA judgment and order.
In his judgment, Kollapen said at the heart of the appeal was whether a pension fund may apply a rule amendment that was not yet registered in anticipation of its future registration and determine the payment of benefits due on that basis.
The judge said while the registration of the amended rule was to take effect from April 2013, retrospectively was a different matter from the determination of the rule that was in existence at the time that Mudau had his withdrawal benefits determined and paid.
Kollapen also said although amended rules may have retrospective effect after registration, they did not have binding effect before registration.
He added that there was nothing in the language of the rule that in any manner could sustain the conclusion that the rule amendment was intended to apply to pending actions.
Kollapen said when the rule was amended in April 2014, there was no claim of Mudau in existence to which the rule amendment could be retroactively applied.
“What the fund was required to do in October 2013 was to finalise the claim of Mr Mudau on the basis of the rule in existence then, which would have warranted payment of R2 140 313.19.
“Following that, and only upon the rule amendment becoming valid in April 2014, could the fund then apply the rule as well as attempt to enforce its retroactive effect.”
Kollapen ordered Akani Retirement Fund Administrators to pay Mudau R1 493 875.77, together with interest from 16 October 2013 until the date of payment.
He ordered the Municipal Employees Pension Fund and Akani Retirement Fund Administrators to pay Mudau’s costs in his application to the Concourt, including the costs of two counsel.
Cape Times
