Municipality Workers Retirement Fund v Mafube Local Municipality (2672/2021) [2021] ZAFSHC 342 (9 September 2021)

IN

THE HIGH COURT OF SOUTH AFRICA

FREE STATE DIVISION, BLOEMFONTEIN

Case No: 2672/2021

In the matter between:

THE

MUNICIPAL WORKERS RETIREMENT

FUND Applicant

and

MAFUBE

LOCAL

MUNICIPALITY Respondent

JUDGMENT BY: MOLITSOANE, J

HEARD ON:

2 SEPTEMBER 2021

DELIVERED ON: 9 SEPTEMBER 2021

[1] The applicant seeks an order to compel the respondent to pay the arrear retirement fund contributions in the amount of R37 795 476.32 in terms of section 13A of the Pensions Fund Act, 24 of 1956 (the PFA) together with interest thereon on the capital amount as required by the PFA.

[2] The applicant is the Municipal Workers Retirement Fund (the Fund), a pension fund organisation registered in terms of s4 of the PFA.

[3] The respondent is the Mafube Local Municipality (Municipality), a duly constituted municipality in terms of s2 of the Local Government Municipal Systems Act, 32 of 2000.

[4] This application was issued on 11 June 2021 and served on 14 June 2021. The Municipality filed its answering affidavit on 12 August 2021. In the answering affidavit the Municipality intimated its intention to apply for a postponement of these proceedings during the hearing. A substantive application for a postponement was, however, only served and filed in the afternoon, a day preceding the hearing of this application.

[5] During the hearing of this application the Fund moved for the postponement of this application ‘until such time as the calculations and possible debatement of monies due are completed.” I dismissed this application for a postponement with costs and proceeded to deal with the main application.

[6] The Municipality is a participating employer in the Fund, and its employees are also members of the Fund. Section 13A of the FPA provides as follows:

(1) “Notwithstanding any provision in the rules of a registered fund to the contrary, the employer of any member of such fund shall pay the following to the fund in full, namely-

a) Any contribution which, in terms of the rules of the fund, is to be deducted from the member’s remuneration; and

b) Any contribution for which the employer is liable in terms of those rules.”

[7] The Municipality is thus obliged to pay the contributions on behalf of members who are employees of the Municipality to the Fund. It is the case of the Fund that the Municipality is indebted to it in the amount of R37 795 476.32 plus late interest payment. According to the Fund no payment has been made since July 2015 to April 2021.

[8] The answering affidavit of the Municipality does not raise any defence. It is replete with allegations of its own internal maladministration and mismanagement which have nothing to do with the Fund. The answering affidavit was clearly not meant to deal with the merits of the claim or more importantly the defence, if any, of the Municipality but was geared to prepare the Fund for the possibility of a request for a possible postponement. The Municipality also belatedly filed a Rule 35(12) notice seeking contribution schedules from the Fund. The contribution schedules were furnished in response to the Rule 35(12) notice.

[9] In the answering affidavit deposed to by the Municipal Manager, the following is stated:

“[7]….Apparently people were promoted to positions, given raises and benefits without being entitled to such promotions or raises. I state this for the simple reason that the calculation of monies due to the Applicant Pension Fund would directly relate to such irregular appointments and promotions.

[8] A further issue that arose was the fact that Mr Mokae as the Chief Financial Officer never attended to the calculations and verifications of the monies due to the Fund. We thus now have to try and reconcile and calculate payments that were due as far as 6 years ago.

[9] ……..To that extent we require that the hearing of the application be postponed until such time as the calculations and possible debatement of monies due are completed.

[10] I am at pains to state that the Municipality is in no way trying to escape liability for any payment due.”

[10] The assertion by the Municipality of the alleged irregular promotions in its ranks does little to assist it in this case. If such allegations are anything to go by, one would have expected the Municipality to play open cards and inform this court of the possible number of such people and the positions they were promoted to and/or benefits they received as a result. It obviously cannot be everybody employed by the Municipality. The Municipality did not even pay the benefits of those employees it does not ‘suspect’ of being irregularly promoted. Common sense dictates that there exists the likelihood that a number of employees still occupy the same positions they occupied six years ago which begs the question why their contributions were not paid to the Fund. It is not in dispute that the Municipality made no payment whatsoever for the last six years. The prejudice to the employees, the former employees and their families is too ghastly to contemplate. No explanation is forthcoming as to why this is so. Even if I could find that there were people irregularly appointed to certain positions and enjoyed benefits they did not deserve, that can hardly excuse the Municipality as a participating employer in terms of the PFA to perform its statutory obligations of paying its contributions and those of its employees to the Fund.

[11] The Municipality asserts that although it does not in any way try to escape liability for any payment due, it cannot ‘agree to an amount that is payable failing a proper statement, debatement and calculation of such amount.” This statement is puzzling. I could not put it better than what is contained in the Applicant’s Heads of Argument with regard to the calculation of the debt of the Municipality in which the following is said:

“The amount due is calculated from the Municipality’s own contribution schedules provided to the Fund in terms of its obligation to do so in terms of section 13A (2) of the PFA. It is documents which have been created by the Municipality and in its possession.”

[12] It is undisputed that the contributions from which payments to the Fund are made, are generated and furnished by the Municipality to the Fund. It is unclear why the Municipality sought from the Fund by way of a Notice in terms of Rule 35(12) the contribution schedules which are supposed to be in their possession as they are its own documents. The ‘defences’ raised by the Municipality stand to be rejected.

[13] Over and above the claim for the outstanding contributions, the Fund also claims interest and costs. The employer is liable to pay interest at the prescribed rate from the first day following the expiration of the period in respect of which such amounts became payable.[1] Regulation 13A (7) provides that compound interest shall be calculated for the period from the first day of the month following the expiration of the period in respect of which the relevant amounts or values are payable or transferable until the late or unpaid amounts are received by the Fund at the prescribed rate. The Fund is thus entitled to interest on late or unpaid amounts as prescribed by the PFA.

[14] The award of costs is in the discretion of the court. The Applicant is asking for costs on attorney and client scale and such costs to include the costs of employing two Counsels. It is contended on behalf of the Applicant that the conduct of the Municipality as indicated in the history of this dispute justifies a punitive cost order. The previous breaches of the Municipality as well as previous litigation show total disregard for the provisions of the PFA and the court orders. The conduct of the Municipality in failing to comply with its statutory obligations prejudices its employees, former employees and members of the Fund. Clearly by failing to pay the contributions which it deducted from the employees is unlawful. By so doing the Municipality is in breach of its statutory obligation. This unlawful conduct is deserving of a punitive cost order.

[15] Counsel for the Fund submitted that because of the complexity of this matter the costs, if awarded, should include the costs of two Counsels. Counsel for the Municipality, however, pointed out that Counsel for the Fund indicated that what the Municipality sought to have the matter postponed for, was something that needed simple addition of the balances of the contribution schedules and thus the exercise did not need to be done over two months. In other words, the matter was not complex. In this way he pointed out that there was no need for the employment of two Counsels. I agree with this submission. According to the Fund, it receives payment contributions schedules from the Municipality. Its total amount claimed is based on the calculation of the totals of those schedules. Surely the addition of the balances of those schedules and the subsequent preparation of the claim would, if one accepts submissions of Adv. Van den Berg SC during an application for a postponement, the Fund does not need the employment of two Counsels. I accordingly make the following order.

ORDER

1. The application for a postponement is dismissed with costs on attorney and client scale.

2. The Respondent is ordered to make payment to the Applicant in the amount of R37,795,476.32(Thirty-Seven Million Seven Hundred and Ninety-Five Thousand Four Hundred and Seventy-Six Rand and Thirty-Two Cents).

3. The Respondent is ordered to make payment of interest to the Applicant on all unpaid amounts from the first day following the expiration of the period in respect of which amounts were payable in terms of section 13A(3)(a)(i) of the Pension Funds, Act 24 of 1956 until date of payment at the prescribed rate of interest in terms of section 13A (7) of the Pension Funds, Act 24 of 1956.

4. The Respondent is ordered to pay the costs of this application on the scale as between attorney and client.

5. The costs shall include the costs of employment of one Counsel.

P.E. MOLITSOANE, J

On behalf of the Applicant: Adv. P. van den Berg, SC

Adv. H Drake

Instructed by: McIntyre and Van der Post Attorneys

BLOEMFONTEIN

On behalf of the Respondent: Adv. LA Roux

Instructed by:

Peyper Attorneys

[1] See s13A(7)(b)(i).