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IN THE HIGH COURT OF SOUTH AFRICA

(TRANSVAAL PROVINCIAL DIVISION)

DATE: 02/12/2005

CASE NO: 15041/2002

UNREPORTABLE

In the matter between:

MARK SHAW PLAINTIFF

And

THE GOVERNMENT EMPLOYEES

PENSION FUND DEFENDANT

JUDGMENT

PATEL, J

A. Introduction

[1] The plaintiff issued summons against the defendant for payment of his pension gratuity which was payable to him upon his resignation on 31 May 2000. The latter’s defence is that it paid the plaintiff’s pension benefit to the South African Revenue Services (“SARS”) and the South African Police Services (“SAPS”) in terms of section 21(3) of the Government Employees Pension Law (Proclamation 21 of 1996).

[2] The parties agreed to certain common cause facts between them and that certain questions of law should be determined separately from other issues and that further proceedings should be stayed until such questions have been decided upon.

B. The agreed facts

[3] The plaintiff was employed by the SAPS from 1 April 1990 to 31 May 2000. During his employment, he was obliged to become a member and contribute to the Government Service Pension Fund which later became known as the Government Employees’ Pension Fund (“the fund”). He contributed to the fund as prescribed and the SAPS contributed to the fund on the plaintiff’s behalf as required by section 17 of the Government Employees Pension Law, 1996. At all material times, the plaintiff was a member of the SAPS, and held the rank of Sergeant. At the time of the termination of his employment he had been a member of the SAPS for 10 years and 26 days.

[4] On or about December 1996, the plaintiff as a member of SAPS arrested one David Moffat Maphumulo who was causing a disturbance at Crocworld. During the arrest, Maphumulo bit the plaintiff’s hand and refused to release it. The latter contends that he was obliged to use force to remove Maphumulo’s bite and hit him on the head injuring his eye. This, according to the plaintiff was the least violent manner in which that he could extricate himself from Maphumulo’s bite. However, the defendant has no knowledge of the correctness of this assertion.

[5] Mr Maphumulo laid a criminal complaint against plaintiff and the Director of Public Prosecutions declined to prosecute. Maphumulo was charged with resisting arrest, assault on police officer and other charges and was duly convicted. However, during or about July 1997, Maphumulo, instituted civil action against the Minister of Safety and Security, in the magistrate’s court for the District of Umzinto, at Scottburgh, under case number 1005/97. The plaintiff was not cited as a party to the civil proceedings and no relief was sought against him. Subsequently the plaintiff was brought under the impression by his Unit Commander that he was a party to the proceedings and was instructed to sign the Undertaking sometime in July 1997. This was ostensibly done in accordance with Treasury Instructions W3.5.2.

[6] The civil matter was set down for trial and the plaintiff was called to court by the representative for the Minister of Safety and Security. On the day of trial the matter was settled, without consultation with or the knowledge of the plaintiff. Although he was at court, he was simply advised that he could leave sine, as the matter was over. At all times the plaintiff denied his guilt to the criminal complaint or assume any liability in the civil action. Subsequently, SAPS, without the plaintiff’s knowledge or consent, paid as settled amount including the taxed costs to Maphumulo’s his attorneys or to Maphumulo himself.

[7] The plaintiff then resigned from his services with SAPS and his last day of service was 31 May 2000. When he was informed that his pension benefits were not to be paid to him, as a result of the settlement in the civil action, and more specifically based on the undertaking he signed in July 1997. The plaintiff was also advised by his Unit Commander to approach the State Attorneys in order to make an offer of payment of affordable instalments, which would then cause the release of his pension benefits to him. He was unable to litigate because of his financial circumstances and merely submitted such an offer through the Office of the State Attorney (KwaZulu-Natal) in September 2000 on the understanding that his pension benefits would be paid to him if the offer was accepted. The offer was not accepted and the pension benefits were not paid out to the plaintiff.

[8] The National Treasury: Pensions Administration (formerly the Department of Finance: Chief Directorate Pensions Administration) is responsible for the administration of the Government Employees Pension Fund (the defendant). The defendant is a so-called “defined benefit fund”, that is where benefits are based on the members’ final salary and years of pensionable service (as defined in the Proclamation and the Rules), multiplied by a prescribed factor. The defendant did not maintain updated records of members’ salary and other personal information and simply relied on participating employers to inform the defendant thereof on a prescribed form upon termination of a member’s service.

[9] After the plaintiff’s resignation from SAPS, the defendant received certain prescribed documents from SAPS on 11 October 2000. These were Z102 document completed by SAPS on 6 October 2000, and indicating a debt to the State or the employer amounting to R110 544.94; Z864 document completed by the plaintiff and copy of plaintiff’s identity document. The defendant also requested proof from the SAPS regarding the debt referred to in item 22 of the Z102 form and received from the SAPS, on 23 March 2001, a copy of first page of a letter from the Area Commissioner Loss Management to the Directorate Support Services indicating the background of the claim and a report of debt to debtor section indicating the calculation of the debt.

[10] The defendant considered the documentation received to be sufficient proof of the debt as indicated in item 22 on the Z102 document. It did not undertake any enquiries into the merits and validity of the debt, since it is not concerned with the internal procedures of participating employers. The plaintiff’s pension benefit, being a gratuity, was calculated in accordance with rule 14.4.1 of the rules of the defendant, amounting to R55 390.28. The rules of the Pension Fund stipulate that the pension benefits of such a member can only be withheld in the circumstances provided for in section 21 of Proclamation 21 of 1996.

[11] The defendant avers that it was entitled to pay the pension benefits of the plaintiff to the SAPS in terms of the provisions of section 21(3)(a) or section 21(3)(c) of the Proclamation. Consequently, it elected to pay the plaintiff’s resignation benefits in the amount of R2 505.07 to SARS and the balance to the SAPS in terms of section 21(3)(a) or (c) of the Proclamation.

[12] This Court is asked to determine following questions of law:

(a) Whether the documents received by the defendant from the South African Police Service, as referred to in the statement of agreed facts, were sufficient in themselves and from the face of them to establish the existence of a debt owing by the plaintiff to the South African Police Services as envisaged in section 21(3)(a) or (c) of Proclamation 21 of 1996;

(b) Whether the defendant was entitled to rely on the documentation as proof of the debt allegedly owed by the plaintiff to the South African Police Services or whether there was an obligation on the defendant to make its own enquiries into the existence of such a debt and, if so, the extent of the investigations required to be undertaken by the defendant;

(c) Whether payment made by the defendant to the South African Police Services constituted a valid payment of the gratuity owed by the defendant to the plaintiff in the event of it being established that as matter of fact there was no debt as envisaged by section 21(3) owed by the plaintiff to the South African Police Services.

(d) On whom does the onus rest to prove the existence or otherwise of a valid debt for the purpose of section 21(3) and do the findings on the first two questions affect the incidence of the onus ab initio or at any stage.

(e) Whether the plaintiff, alternatively the defendant, is under any obligation to join the South African Police Services to these proceedings.

C. Section 21(3) of the Proclamation.

[13] Section 21 of Proclamation 21 of 1996 provides:

“Prohibition on cession and attachment of benefits

(1) No benefit or right in respect of a benefit payable under this Act shall be capable of being assigned or transferred or otherwise ceded or of being pledged or hypothecated or, save as is provided in section 26 or 40 of the Maintenance Act, 1998, and section 7(8) of the Divorce Act, 1979 (Act 70 of 1979), be liable to be attached or subjected to any form of execution under a judgment or order of a court of law.

(2) If any member, pensioner or beneficiary attempts to assign or transfer or otherwise cede or to pledge or hypothecate any benefit to which he or she is entitled under this Law or any right in respect of such benefit, payment of such benefit to such member, pensioner or beneficiary may be withheld, suspended or discontinued if the Board so directs: Provided that the Board may direct that such benefit or part thereof shall be paid to one or more of the dependants of such member or pensioner or to a trustee for such member or pensioner or his or her dependants during such period as the Board may determine.

(3) Notwithstanding the provisions of subsection (1) or of any other law –

(a) any amount which is payable to the employer or the Fund by any member in the employment of such employer on the date of his or her retirement or discharge, or which the employer is liable to pay in respect of such member;

(b) any amount which has been paid to any member, pensioner or beneficiary in accordance with the provisions of this Law and to which such member, pensioner or beneficiary was not entitled;

(c) the amount of any loss which has been sustained by the employer through theft, fraud, negligence or any misconduct on the part of any member, pensioner or beneficiary which has been admitted by such member or pensioner in writing or has been proved in a court of law;

(d) any amount, plus interest at the rate determined by the Board after consultation with the actuary, due to the Fund in respect of an amount for which the Fund becomes liable under a guarantee furnished in respect of a member for a loan granted by some other person to that member in terms of the rules,

may be deducted from the benefit payable to such member, pensioner or beneficiary under this Law in a lump sum or in such instalments as the Board may determine.

(4) Where a member dies before the last day of a period in respect of which any salary or allowance was paid to him or her prior to his or her death, a pro rata part of the amount so paid may be recovered in respect of the unexpired portion of that period by deducting it in a lump sum, or in such instalments as the Board may determine, from the benefit payable to the estate or to be a beneficiary of the deceased member, as provided for in the rules.”

D. First Question

[14] Applied to the facts of the case, section 21(3) of Proclamation 21 of 1996 requires that the amount deducted by the defendant from the plaintiff’s pension benefit must either have been payable by the plaintiff to the SAPS on the date of his registration, or have been a loss which has been sustained by SAPS through the plaintiff’s negligence or misconduct, which has been admitted by the plaintiff in writing or has been proved in a court of law. The defendant’s stance is that it considered the documentation received to be sufficient proof of the debt indicated in item 22 of the Z102. This Z102 document was the first document received by the defendant. It was completed by the SAPS on 6 October 2000 and a Z864 document containing the plaintiff’s personal and banking details. The Z102 document is a multi-purpose form completed by the participating employer on the occurrence of a particular event that has an influence on the pension interests of its employees. The must be certified by the relevant participating employer to contain information that is correct. This Z102 document reflected a debt to the State or the employer amounting to R110 544.94 as resulting from a civil claim. Mr Basson for the defendant submitted that the information contained in the Z102 form prima facie indicates the existence of a debt owed by the plaintiff to SAPS as envisaged by section 21(3)(a) or (c) of Proclamation 21 of 1996.

[15] It appears after requesting proof from SAPS regarding the debt mentioned in the Z102 form, the defendant received the first page of a letter from the Area Commissioner Loss Management to the Directorate Support Services alluding to the background of the claim, and a report of debt indicating the calculation of the debt. The background to the claim is set out as follows:

“On 96-12-21 the member was on duty and had attended to a complaint of disturbance at Crocworld, on the South Coast. Member arrested the plaintiff in this matter and detained him at Umkomaas. At the Police Station, it was alleged that the plaintiff was assaulted with a fingerprint roller whereby he lost an eye.

A claim of R100 000.00 was received.

An offer of R67 000.00 was made which was accepted and paid. On 98-12-22 that State Attorney advised that the member had overstepped his bounds and loses state protection.

Member was served with a Recovery of Debt Notice which he did not respond to. Because of time constraints the State Attorney was requested to serve summons on the member.

Member subsequently took his discharge from the service. He approached the State Attorney where he accepted liability and offered to pay R150.00 per month and requested that his pension be paid out to him. (Attached correspondence re repayment of debt).

The legal costs amounted to R39 960.35.”

[16] The information contained is an iteration that the plaintiff owed an amount of money to his former employer arising from a civil claim instituted against the former employer for which the plaintiff as employee was responsible. The information contained in the letter merely confirmed the note in item 22 of the Z102 that the claim arose from civil action.

[17] The documents received by the defendant prima facie indicates that an amount was payable by the plaintiff to SAPS on the date of his resignation, as contemplated by section 21(3)(a). It prima facie also indicates that a loss was sustained by SAPS through the plaintiff’s negligence or misconduct and he admitted liability to the State Attorney as contemplated in section 21(3)(c).

[18] Ms Annandale for the plaintiff argued that mere reliance on the documentation by the defendant does not simply indicate that there was a debt. She submitted that the plaintiff has no knowledge of the documents which he cannot dispute before the payment is withheld or paid over to his employer. This happens completely without any indication to the plaintiff. There must in actual fact be a debt. The plaintiff must be informed of such a debt because otherwise he, as the employee, would not know whether any document passed between his employer and the fund. It is common cause the fund does not keep records and substantially relies on the Z102.

[19] I am of the view that it would certainly be extraordinary if the proclamation simply intended to authorise a debt of which the plaintiff had no knowledge or only had deemed knowledge. The validity of a debt is a jurisdiction fact upon which the withholding or paying over of the benefits depends. It is a necessary corollary that the employee should have been informed before the monies were paid over to SARS and SAPS. [See: Singh v Commissioner, South African Revenue Service 2003 4 SA 520 (SCA) para [18] at 527I-528B.] Further, fairness requires notice of intended paying over of the paying over of the plaintiff’s pension benefits and an opportunity to be heard before such payment was made. [See: De Beer NO v North-Central Local Council and South Central Local Council and Others (Umhlatuzana Civic Association intervening).] In the final analysis the documents received by the defendant from SAPS are not ex facie sufficient in themselves to establish the existence of a debt owed by the plaintiff to SAPS as contemplated in section 21(3)(a) or (c) of the Proclamation. Therefore, there is no valid debt.

E. Second Question

[20] Pertaining to the second question, the defendant did not undertake any further investigation regarding the validity of the debt. What is pertinent is the relationship between the employee, the employer and the pension fund. These three parties are bound in a particular way and each of them has rights and obligations towards the other according to their relationships. The pension fund forms an integral part of the employer and employee relationship. [Lorentz v Tek Corporation Provident Fund and Others 1998 1 SA 192 (W) 229H; Resa Pension Fund v Pension Fund Adjudicator and Others 2000 3 SA 313 (C) 322J] This is also evident from the fact that the rules of the defendant are the result of a negotiations and collective agreement between the employer and employee organisations in the public sector. (See: section 29 of the Proclamation.) Despite their inter-connection the three parties are also separate and independent from each other. A claim arising from the relationship between the member and the pension fund does not necessarily be adjudicated between the member and the employer. Similarly a claim arising between the member and the employer is not a matter to be settled between the member and the pension fund. [Medrcedes Benz v Mdyogolo 1997 2 SA 748 (E) 752I-753C]

[21] The plaintiff was an employee of SAPS and also a member of the defendant. The plaintiff had and has rights and obligations in accordance with his terms and conditions of service, as well as a member of the pension fund. SAPS are also a participating employer of the defendant. The SAPS has rights and obligations towards its employees as well as the pension fund. Thus, the defendant has a relationship with the plaintiff as one of its members, but also with the SAPS as on of the participating employers. The pension fund has rights and obligations towards both its members and the participating employer.

[21] Membership of the defendant is compulsory for all employees in the public sector. (Section 4 of the Proclamation) The defendant is a defined benefit pension fund that is where benefits are based on the members’ final salary and years of pensionable service, multiplied by a prescribed factor. It follows that in each case where the service of a public sector employee is terminated, the defendant must have the final salary and years of service of the relevant member available in order to perform a calculation of the relevant pension benefit. However, the defendant, being an independent entity, separate from the member and the employer, does not keep updated records of members’ salary and other personal information and relies on the participating employer to inform the defendant thereof on a prescribed form upon termination of a member’s service. The form Z102 document, which is prescribed in accordance with section 7(3) and 26(1) of the Proclamation. Ms Annandale contended on behalf of the plaintiff that the defendant should perform its own enquiry into the existence of a debt which arose between the employer and employee. However, for the defendant Mr Basson submitted that this would simply result in a duplication of the processes which is finalised between the employer and employee. It would also lead to an unsatisfactory situation where the employer and the fund would in certain circumstances reach different conclusions regarding the same employee. If the contention advanced on behalf of the plaintiff’s is correct then the defendant is required to investigate the merits and validity of the debt and in all probability the defendant would not be able to rely on any of the information received from its participating employers. At most, what would be required from the defendant when it makes a deduction in terms of section 21(3) is to call for information from the employer, as the defendant did, and to review the information to establish whether it complies with the requirements of subsection (3). I am not persuaded by Mr Basson’s argument that the relationship between the three parties does not allow the pension fund to undertake any investigation into the merits and validity of a debt arising from the relationship between an employer and employee. The defendant simply cannot rely on the information that is provided by the plaintiff’s employer. It cannot just accept the ipse dixit of the employer without verifying the correctness of the information that is conveyed to the defendant by the employer.

[22] In this case, the question is what further information would be elicited by such an investigation. It is apparent that the information available to the defendant when it made the payment of the pension benefits indicated that the plaintiff was indebted to SAPS in an amount in excess of his resignation benefit because of the settlement of the claim instituted by Mr Maphumalo against SAPS for the loss of his eye during an arrest effected by the plaintiff. The latter was informed in a letter of 21 September 2000 from the State Attorney that the claim including the legal costs was settled and paid. In paragraph (d) of the letter, the plaintiff was informed that:

“The finding was that you had forfeited State cover in terms of the Treasury Instructions and that you had to repay the amount of the loss to the State.”

[23] Furthermore, Chapter W of the Treasury Instructions, issued in terms of the Exchequer Act of 1975, (the instructions remain in force until repealed in terms of section 76 of the Public Finance Management Act 1 of 1999 (“PFMA”). The PFMA came into effect on 1 April 2000. And on the following day the plaintiff registered.) Broadly, the Instructions deal with losses or damages: dealing with claims against and by the state and against person in its service.

[24] The Treasury Instructions W.3.2 provides that the State accepts liability for all claims arising from the acts or omissions of all persons instituted against the State or against the persons, unless the Accounting Officer, after consultation with the State Attorney, is of the opinion that the person acted in a certain prescribed manner in which case the amount which the State was compelled to disburse, and the legal costs, shall be recovered from the person, whether in terms of section 34 or any other provision in law or agreement, as the case may be, or by instituting legal process. Further, the Treasury Instruction W.3.5.8 provides that when a claim has been paid, it must be considered whether, in terms of the instructions, the person can be held liable for the amount paid to the claimant as well as the legal costs. If so, such amounts must be recovered from the said person in terms of section 34 or any other corresponding provision in a law or agreement, as the case may be, or by legal process. If the Accounting Officer and the State Attorney agree that these amounts are not recoverable, the matter is considered to have been finalised. But, if the Accounting Officer and the state attorney cannot reach agreement, then the Accounting Officer shall submit the case to the Treasury.

[25] The State Attorney’s letter of 21 September 2000 indicates that a decision was taken that the amount paid by SAPS to the claimant, including the legal costs, must be recovered from the plaintiff. Mr Basson submitted on behalf of the defendant that the details regarding the procedure adopted to liquidate SAPS claim against the plaintiff, did not detract from the fact that the defendant was informed of the existence of the claim, and the fact that it arose from a civil claim. The particulars that became available for purposes of this matter confirms the cause of action on which the SAPS relied for claiming the deduction and the amount of the claim. Furthermore, the plaintiff’s explanation as to the manner in which the fight between him and Maphumalo started and ended, and how it was settled by the State Attorney does not take the matter any further and does not detract from the fact that the matter was settled and that the plaintiff was required to repay the amount to SAPS.

[26] A further consideration is whether the defendant may deduct in terms of section 21(3) upon receiving a claim by the employer contained in Z102, or whether the defendant must perform an investigation into the validity of such a claim before it can make a deduction, raises the question whether the phrase “may deduct” refers to the exercise of an authority or a discretion.

[27] It is apparent that purpose and object of section 21(1) is to protect pensioners against being deprived of the source of their pensions. The protection afforded is, however, subject to a number of exceptions, one of which is the exception provided for in section 21(3). The latter subsection affords an employer a right of access to pension fund benefits which other creditors do not have. It is the employer that causes so much of the pension benefits to be attached, as is owed to it on the date of termination of service of the employee. [See: ABSA Bank Ltd v Barmeister and Others 2004 5 SA 595 (SCA) paras [12] – [13] at 600F-601D/E.]

[28] The word “may” is usually permissive and in the context of section 21(1). Section 21(3) describes the circumstances under which an employer may cause a deduction to be made from a member’s pension benefits, but is by no means exhaustive of the employer’s remedies. It may institute legal action through the normal procedures. The phrase “may deduct” is therefore used in its ordinary sense that the defendant is empowered, in certain defined circumstances, to make a deduction from a member’s pension benefits. [See: De Wet and Others v Western Bank Ltd 1977 4 SA 770 (T) 777G; Stocks Construction (OFS) (Pty) Ltd v Metter-Pingon (Pty) Ltd 1978 4 SA 35(T) 39A-C]

[29] It is clear that the authority provided for the pension fund to make a deduction from a member’s pension benefits on the basis of a claim instituted by an employer, the details of which must be certified by an Assistant-Director employed by the respective employer on the Z102 to be correct, but that does not have the effect that the defendant is not required to perform its own investigations into the merits of the matter, before a deduction is made.

[30] Thus, pertaining to the second question, on my analysis the defendant has a duty to make enquiry into the merits and validity of the debt, but mere reliance on the documentation received from SAPS regarding the existence of the debt certainly does not constitute prima facie proof of a debt allegedly owed. The extent of the inquiry will depend upon the circumstances of each case.

F. Third Question

[31] The parties agreed that if the Court determines that there is no valid debt as contemplated by the proclamation, concomitantly then there could have been no valid payment, accordingly then it is not necessary to deal with the third question. Because of the conclusion reached pertaining to first and second questions it is not necessary to consider the third question.

G. Fourth Question

[32] The fourth question is, on whom does the onus rest to prove that there is a valid debt and whether the finding on the first two questions affect the incidence of the onus.

[33] In the Le Roux v Child Welfare Provident Fund and Another (2) [2002] 1 BPLR 2973 (PFA), Mr John Murphy, the Pension Fund Adjudicator, indicated, para 8, at 2976 C/D, regarding section 37 Dof the Pensions Fund Act 24 of 1956, that:

“Section 37D of the Act creates a defence for the fund not to pay a pension benefit to a member. Therefore, the fund bears the onus of establishing its defence on a balance of probabilities.”

[34] Counsel on behalf of the defendant conceded that the defendant bears the onus and has the duty to begin. That concludes the fourth question.

H. Fifth Question

[35] The last question pertains to the joinder of SAPS to the proceedings. Does SAPS have a direct and substantial interest in the proceeding between the plaintiff and the defendant? Ms Annandale rightly submitted that the plaintiff does not have a cause of action against SAPS and his contract as a member of the pension fund is with the defendant. Nor is the plaintiff seeking any relief against SAPS. From the defendant’s perspective it may be expedient to join SAPS, however, SAPS does not have a “direct and substantial interest” in the matter. Therefore, there is no necessity to join SAPS a party to the proceedings.

I. Conclusion

[36] In summary, the answers to the questions of law are:

[36.1] The documents received by the defendant from SAPS are not sufficient in themselves to establish the existence of a debt owed by the plaintiff to SAPS.

[36.2] It is incumbent upon the defendant to enquire into the merits and validity of the debt and mere reliance on the documentation received from SAPS does not constitute prima facie proof of the debt allegedly owed by the plaintiff.

[36.3] The defendant bears the onus to establish the existence of a valid debt.

[36.4] It is not necessary to join SAPS as a party since it does not have a direct and substantial interest in the proceedings.

[37] Finally, the costs in respect of the issues referred to this Court in terms of rule 33(4) shall be costs in the cause and the remaining issues are postponed sine die.

E M PATEL

JUDGE OF THE HIGH COURT

15041/2002

HEARD ON: 02/09/2005

FOR THE APPLICANT: ADV A ANNANDALE

INSTRUCTED BY: MESSRS OELOFSE HEFER & WESSELS INC,

PRETORIA

FOR THE DEFENDANT: ADV J L BASSON

INSTRUCTED BY: MESSRS STATE ATTORNEY, PRETORIA

DATE OF JUDGMENT: 02/12/2005

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