Protektor Preservation Pension Fund v Bellars and Others (4913/2008) [2008] ZAKZHC 108; 2009 (4) SA 455 (D) (24 July 2008)

CASE NO. 4913/2008

IN

THE HIGH COURT OF SOUTH AFRICA

DURBAN

AND COAST LOCAL DIVISION

In the matter between

PROTEKTOR

PRESERVATION

PENSION FUND Applicant

and

SHERALYNN BELLARS First Respondent

ROBERTY HENRY BELLARS Second Respondent

THE REGISTRAR OF PENSION FUNDS Third Respondent

____________

Delivered :

24 July 2008

J

U D G M E N T

_____________

LEVINSOHN DJP :

[1] In these motion proceedings the applicant seeks declaratory orders in the following terms : -

“(1) That it be declared that the words ‘on account of his resignation from office’ in the definition of ‘pension interest’ in section 1 of the Divorce Ac No 70 of 1979 (‘the Divorce Act’) be read to refer to the termination of an Employer/employee relationship in accordance with the definition of the terms EMPLOYEE and EMPLOYER in the Applicant’s Rules;

(2) That it be declared that the definition of ‘pension interest’ in section 1 of the Divorce Act be read to include the after tax withdrawal benefit (as defined in the Applicant’s Rules) that would be payable to a MEMBER if he or she had opted to take a total withdrawal benefit as at the date of divorce;

(3) Directing that the costs of this application be borne by the respondent or respondents, who oppose this application, in the event of more than one respondents so opposing, such costs to be paid jointly and severally by such respondents, the one paying the other to be absolved.”

[2] The respective respondents do not oppose.

[3] The salient background facts giving rise to the application are in brief outline the following.

[4] The first and second respondents were formally married to each other. They were divorced on 7th November 2007. Paragraphs 4 and 5 of the Court order read as follows : -

“4. That the PROTEKTOR PENSION FUND (the fund) pay the plaintiff an amount of R363 959,93 of the defendant’s pension interest in the und as at the date of divorce when such benefit accrues to the defendant together with such interest or capital growth which may have accrued from the date of divorce to the date of such pension benefit accrues to the defendant.

5. That the registrar of this court forthwith notify the fund at (sic) that : -

(a) an endorsement be made in the records of the fund recording this order;

(b) the fund furnish proof of such endorsement to the registrar in writing within ONE (1) month or (sic) receipt of this notification.”

[5] The applicant is “the fund” referred to in the Court order. The applicant describes itself as a “preservation fund”. These funds are designed to act as a temporary warehouse for the withdrawal benefits from registered and approved pension or provident funds. Employees who have left their employment may invest their accrued benefits in the applicant. Although the contractual relationship between employer and employee has ceased for purposes of the preservation fund and to give effect to the requirements of SARS the relationship between the member and his former employer is maintained beyond the date of termination of the employment.

[6] The applicant’s rules set forth the eligibility of persons to participate in its fund which is basically that that employee’s membership of an approved pension fund has terminated and he/she she is entitled to transfer pension benefits to an approved preservation pension fund.

[7] The second respondent became a member of the applicant on 6th December 2004. An amount of

R799 127,67 was transferred into the applicant’s fund from the Telkom Retirement Fund. The latter thus became a participating employer in the fund.

[8] In October 2005 the second respondent withdrew a portion of his benefits, leaving an accumulated credit in excess of R363 959,93 (which was the amount he had to pay in terms of the Court order).

[9] Second respondent is at present 50 years of age. He has not reached “retirement age” in terms of the applicant’s rules nor does he qualify for early retirement.

[10] The significant difference between the applicant, a preservation fund, and a fund operating an ordinary pension scheme has given rise to difficulty in complying with the said Court order. Section 7(8) of the Divorce Act provides : -

“(8) Notwithstanding the provisions of any other law or of the rules of any pension fund-

(a) the court granting a decree of divorce in respect of a member of such a fund, may make an order that-

(i) any part of the pension interest of that member which, by virtue of subsection (7), is due or assigned to the other party to the divorce action concerned, shall be paid by that fund to that other party when any pension benefits accrue in respect of that member;

[11] “Pension interest” is defined in section 1 of the Divorce Act as : -

“… in relation to a party to a divorce action who-

(a) is a member of a pension fund (excluding a retirement annuity fund), means the benefits to which that party as such a member would have been entitled in terms of the rules of that fund if his membership of the fund would have been terminated on the date of the divorce on account of his resignation from his office;”

[12] Now as pointed out by the applicant’s deponent in the founding affidavit the said section 7(8) was designed to ensure that there be an equitable division of assets between the spouses on divorce. Thus the portion of the pension interests that falls to be transferred to the non-member spouse is based on its valuation as at the date of the divorce.

[13] The definition of “pension interest” speaks of a termination of membership of the fund on account of “resignation from office”. Thus the valuation of the pension interest was based on a deemed resignation of the member from the scheme. Payment of the non-member’s interest it seems to me would only become due when the pension benefits accrue.

[14] Plainly when the parties and their legal advisers settled the divorce action they did not carefully apply their minds to the implications of the said sections of the Divorce Act. More particularly they did not consider how the particular rules of the applicant’s fund would affect the situation. Thus the concerns raised by the applicant herein are wholly justified and the applicant’s attitude in seeking an equitable resolution is to be commended.

[15] I agree with the applicant’s contention that having regard to the definition of “pension interest” a serious anomaly arises when one views that definition in the context of a preservation fund operated by the applicant. In reality the employer/employee relationship is an artificial one. It exists only to cater for the requirements of SARS. One cannot realistically visualize a situation where the employee would resign from his office in the context of the preservation fund. However as pointed out by the applicant this artificial relationship or link between employee and employer ceases when the employee takes a total withdrawal benefit from the applicant’s fund. The severing of this link equates in my view to the concept of “resignation from office” in the said Act.

[16] Inasmuch as the said Court order refers to a specific amount that is payable to the first respondent, no difficulties in regard to quantification arise and there are sufficient funds available to pay that amount.

[17] In the result I am of the view that the relief sought is entirely appropriate. An order will issue in terms of paragraphs 1 and 2 of the notice of motion.

DATE OF JUDGMENT : 24 JULY 2008

DATE OF HEARING : 22 MAY 2008

COUNSEL FOR THE APPLICANT: MS K. PILLAY

INSTRUCTED BY : WALKERS INC,

CAPE

TOWN

C/O AMC HUNTER INC,

DURBAN