PENSION FUNDS ADJUDICATOR DETERMINATION IN TERMS OF SECTION 30(M) OF THE PENSION FUNDS ACT 24 OF 1956
JC Cockcroft v Mine Employees Pension Fund decision by Mamodupi Mohlala given in 2007
Executive Summary:
Section 28(b) of the Pension Funds Amendment Act II of 2007 (“the new Act”) amends Section 37(D) of the Pension Funds Act which deals with permissible deductions by the addition of a sub-section that reads as follows :
“For the purposes of Section 7(8)(a) of the Divorce Act 1979 the pension benefit referred to in that section is deemed to accrue to the member on the date of the court order. “
The effect of this provision is that it creates two deeming provisions the first being that the date of divorce is considered a contingent event in determining the benefit and the second bringing the date of accrual of the benefit to a member spouse forward to date of divorce. The obvious consequence of this acceleration is that the divorce benefit then accrues to the non-members spouses on the date of divorce.
This Pension Fund determination deals with the consequences of the amendment, including whether the new Act has a retrospective effect in respect of divorce orders granted prior to the promulgation of the new Act.
The determination:
In terms of the divorce order granted in this case, the pension interest awarded to the complainant (called the divorce benefit) was to be paid on finalisation of divorce proceedings or when the benefit accrued to the member’s spouse, whichever date was the earliest. The complainant requested payment of the divorce benefit by the Fund, given that the divorce proceedings had been finalised.
The Fund responded to the demand by citing Section 7(8)(a) of the Divorce Act, which states that a pension interest due to a party in a divorce action shall only be paid when the benefit accrues to the member. The Fund did not consider itself to be bound by the divorce order ordering it to pay the complainant her divorce benefit before same became due to the member.
There has been an amendment to the Pension Funds Act II of 2007 (“the new Act”) in September 2007 as stated above which, according to this decision, changes the situation. In terms of the Pension Fund Rules the date of accrual of a benefit is predicated on the happening of a contingent such as dismissal, retirement, resignation or retrenchment of a member. Before the new Act, this translated into a situation where a non-member spouse would only receive payment when a member spouse retired or resigned etc. The adjudicator in this matter highlighted that this situation undermined “the clean break principle” that a litany of cases in divorce matters have propounded.
The adjudicator went into the test for determining whether legislation was retrospective, namely the enquiry as to whether any retrospectivity would interfere with vested rights. The adjudicator found that considering that a member spouse depends on a contingent event to become entitled to any benefit, until that contingency occurs a member spouse does not have a quantifiable right to anything. Rather, the member spouse has a ‘spes’. In the circumstances, there could not be an objection against retrospective operation as it did not affect any vested rights.
The adjudicator considered that even if this was wrong, it may not lead to a different conclusion and sited Thiron J’s 1994 decision in Kruger v President Insurance Company where she held that the presumption against retrospectivity was an aspect of interpretation and should yield to the intention of the legislature.
The balancing exercise in a case such as this would require asking whether a member spouse’s interest, in growth on the investment at the expense of a non-member spouse’s interest, is a protectable interest. This must be weighed against the desire to promote simple justice between the parties.
The arbitrator referred again to the intention of the legislature clearly in this amendment to rectify the previously unfair position of non-member spouses. The adjudicator was therefore satisfied that the legislature did intend for the amended provision to apply retrospectively to existing divorce orders.
In the circumstances it was ordered by the adjudicator that the complainant was free to exercise her election to be paid the divorce benefit and that the pension fund would be directed to implement the election opted by the complainant within 60 days of receipt of written notification.
